Washington quietly turns its back on green finance. Europe is pouring in the money instead: $242bn in green bonds in just six months. The divide could decide which currency ends up financing the world’s shift away from fossil fuels.
That $242bn was no fluke. It puts global green bond issuance on track to beat the previous record of $673bn, set in 2024. Europe accounted for around 55 per cent of that global total last year, and this year it should account for almost two-thirds. American issuance is heading the other way: it peaked at $94bn in 2021, fell to $77bn last year, and reached just $34bn in the first half of 2026, with no rebound in sight.
“In Europe, we have not really seen this kind of death of ESG that was very much present in the US,” Larissa de Barros Fritz, senior fixed-income strategist at ABN Amro, recently told the Financial Times. “This year, the whole ESG story is back.” She described the American trend as ‘greenhush’: companies keep doing the work but avoid putting a green label on it. There is considerably less incentive to do that in Europe.
Europe kept the green label
Green bonds are, at their simplest, ordinary debt with a specific purpose. Companies or governments borrow money from investors and commit to spending the proceeds on environmental projects. The idea has grown rapidly over the past decade. Since the Paris Agreement and the introduction of the market’s international principles, global green bond issuance has more than quintupled. Europe has been at the centre of that growth.
In 2024, the euro accounted for 46 per cent of cumulative green bond issuance, compared with 28 per cent for the US dollar, according to BNP Paribas. The euro is not the dominant currency in global finance. The dollar still accounts for around 58 per cent of global foreign exchange reserves and is involved in roughly nine out of ten foreign exchange transactions. Green bonds are one of the exceptions.
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That is partly because Europe has spent years building rules and institutions around sustainable finance. The European Green Bond Standard, which entered into force in 2023 and began applying in 2024, gives issuers a common framework for bonds marketed as European green bonds. It links the use of proceeds to the EU taxonomy and introduces transparency requirements and supervision of external reviewers. The standard is voluntary. But it gives the market something it has long lacked: a clearer definition of what “green” actually means. And European banks are already using it.
In 2025, Dutch ASN Bank issued its first European Green Bond under the standard, raising €500m through seven-year Senior Non-Preferred notes with a 3.375 per cent coupon. The proceeds were earmarked to refinance loans for the acquisition and ownership of buildings aligned with the EU taxonomy. The issuance brought ASN Bank’s total outstanding green bonds to €4.3bn. That matters for investors as much as for issuers. Sustainable finance has spent years dealing with concerns over greenwashing, inconsistent standards, and uncertainty about whether a bond labelled green really finances much of a transition. Europe’s answer has largely been to regulate the label.
The energy security effect
There is another reason green bonds are finding their second wind in Europe. Energy security has moved back up the political agenda. The energy shock surrounding the US–Iran conflict has put renewed attention on Europe’s dependence on imported fossil fuels. Investments in renewable energy, electricity networks, and other infrastructure needed for the transition can therefore be framed in increasingly practical terms.
The energy transition is no longer only about emissions. It is also about where Europe gets its energy from, and how vulnerable that leaves it. Utilities have been among the strongest green bond issuers this year. In June, Spain’s Iberdrola raised €1.5bn through two green bonds. German-based EEW Energy from Waste raised another €550m. In February, French utility EDF raised €2.75bn.
With the US–Iran conflict there was a lot of demand for utilities debt and the whole idea about the energy transition has regained a lot of attention. — Larissa de Barros Fritz, senior fixed-income strategist at ABN Amro
“The energy transition story did lose a bit of breath last year and now it’s regaining traction,” Ms de Barros Fritz said. “With the US–Iran conflict there was a lot of demand for utilities debt and the whole idea about the energy transition has regained a lot of attention.”
Europe’s green financing problem
That does not mean the European market is without problems. Green bonds accounted for 6.9 per cent of all bonds issued by EU corporations and governments in 2024, up from 5.3 per cent in 2023. Corporate issuance has grown particularly quickly: green bonds made up 12.8 per cent of corporate bond issuance in 2024. But the market is still uneven across the bloc.
In 2024, green bonds represented more than 16 per cent of bonds issued in Sweden, Denmark, and France. Thirteen EU member states did not issue any green bonds at all. Europe also has a more fundamental problem. Its capital markets remain fragmented, the pipeline of standardised green projects is not large enough everywhere and some countries lack a sufficiently deep domestic investor base.
The EU has tried to tackle part of that problem through its sustainable finance framework and the European Green Bond Standard. But rules alone cannot create projects worth financing or investors willing to buy the debt. And Europe needs a lot of both. The continent has set itself ambitious targets for decarbonisation while simultaneously trying to rebuild its energy security and competitiveness. That will require enormous amounts of private capital, and green bonds are one way of getting it.
The greenback question
There is a potentially bigger consequence. If Europe continues to dominate green bond issuance while US companies increasingly avoid the green label, the euro could become even more closely associated with financing the energy transition.
BNP Paribas made precisely this argument last year, asking whether the euro could become the world’s “greenback”. It is an intriguing prospect. The dollar dominates global finance because of the depth and reach of American financial markets. The euro does not come close to matching that position.
But the energy transition is creating a new source of demand for capital — and Europe is already unusually well positioned to supply it. The US is not disappearing from the market. China is also becoming an increasingly important issuer. And green bonds remain a relatively small part of the global bond market.
Still, the political divergence is becoming difficult to ignore. The Trump administration has made fossil fuels a central part of its energy policy and attacked Biden-era climate programmes. In Europe, ESG has survived the political backlash to a much greater extent.
