Takeaways

• South-east Asia’s ESG bond proceeds surged 73% in Q3 2025, rebounding after a slow first half.
• Green, social, and sustainability financing remains strong across the region despite global geopolitical uncertainty.
• Analysts expect the momentum to continue into 2026, driven by steady issuer interest and robust investor demand.

South-east Asia saw a sharp rebound in environmental, social, and governance (ESG) debt activity in the third quarter of 2025, signalling renewed confidence in sustainable finance across the region. Proceeds from ESG bonds rose 73.1 per cent to US$9.1 billion, up from US$5.3 billion a year earlier, according to LSEG data.

ESG loan issuance also gained ground, increasing 33.3 per cent to US$14.8 billion from US$11.1 billion in the same period. Analysts say the surge reflects a return to the market by issuers who had previously paused activity due to geopolitical tensions, interest rate uncertainties, and macroeconomic headwinds.

OCBC’s sustainability chief Jeong Yoonmee noted that issuers took a “wait-and-see” approach in the first half of the year but have since resumed activity as clarity improved. She added that momentum around the region’s energy transition remains strong, even as global climate ambitions waver.

Read More: ESG Bond Issuance in Southeast Asia Sees Sharpest Decline Yet

ESG Bonds Outperform Other Regions

South-east Asia’s ESG bond proceeds bucked global trends. Worldwide issuance fell 3.8 per cent to US$198.2 billion in Q3 2025, while Asia-Pacific excluding Japan saw a modest 5.5 per cent rise. ING’s sustainable solutions head for APAC, Martijn Hoogerwerf, said quarter-to-quarter swings are common due to issuer timelines.

HSBC’s Max Thomas added that many issuers pushed their plans into Q3 following the tariff-driven volatility in Q2. By October, total ESG bond issuance had already matched 2024 levels, supported by issuers' pre-funding needs for 2026.

Singapore’s green bond market stood out, with about half of Singapore-dollar-denominated bonds carrying ESG labels, well above last year’s 35 per cent average. Analysts say Asia’s openness to issuing labelled bonds in local currencies is helping deepen the market.

Observers expect more activity in 2026, particularly from issuers with established sustainable finance frameworks. Investor appetite also remains firm, especially among green bond funds. Transition bonds, however, remain limited. Only one such bond was issued in Asia-Pacific excluding Japan, and none in Southeast Asia.

Strong Demand for ESG Loans

ESG loan proceeds in Asia-Pacific excluding Japan jumped 46.2 per cent in Q3 2025, outperforming global growth of 12 per cent. Jeong attributed the regional surge to renewed activity in green loans and growing participation from emerging sectors such as data centres, telecommunications, and chemicals.

DBS’s Shilpa Gulrajani highlighted rising demand from digital infrastructure and logistics players seeking cleaner energy solutions. She said real-economy transition financing, covering grid upgrades, energy efficiency, and supply chain decarbonization, is also gaining traction.

Also Read: Sustainable Bond Market Sees Sharp First-Half Decline in 2025

Banks expect the market to stay strong into 2026 as companies incorporate sustainability into long-term plans and Asean governments continue backing green policies. OCBC led ESG loan arrangements in Southeast Asia in the first nine months of 2025, followed by DBS and Bank of China.

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