Globalgreen bond issuance has been growing nominally but faces immense challenges that limit its broader impact. Climate Bonds Initiative reports that green, social, sustainability, and sustainability linked (GSS+) bonds aligned with their standards have now surpassed USD 6 trillion outstanding- an extraordinary rise from roughly USD 2 billion fifteen years ago, with over USD 1 trillion growth recorded in the past year. However, despite these impressive numbers, green bonds still comprise only about 3% of the total bond market, indicating a relatively small footprint compared to global capital markets.
Key obstacles are dragging on green bond momentum: inconsistent definitions across markets, costly certification and reporting requirements, weak monitoring mechanisms, regulatory complexity, and persistent concerns over potential greenwashing practices. As IEEFA highlights, shrinking or even negative green premiums (“greenium”) further erode their financing appeal, particularly in uncertain global macroeconomic conditions.
The Indian context further illustrates these tensions. In June 2025, the Reserve Bank of India (RBI) cancelled its 30-year sovereign green bond auction, despite bids exceedingly twice the offered amount, as investors sought yields above the bank’s expectations. This reflects the disappearing greenium in real world pricing, exacerbated by global macroeconomic turmoil.
Further, the demand for climate finance remains robust- even if green bonds alone are losing some luster. India, for instance, has raised Rs. 440 billion in green bonds since January 2024 across diverse issuer categories including the Central Government, corporates, financial institutions and municipalities. This demonstrates sustained interest in sustainable funding, even as market mechanisms adjust.
The current phase
reflects a shift in direction, not a withdrawal. While green bonds encounter
structural limitations and credibility challenges, climate finance as a whole
continues to evolve steadily and adaptively. Policymakers, investors, and
institutions are increasingly adopting a diversified mix of instruments,
including sustainability-linked loans, blended finance models, and
performance-based frameworks. This shift reflects a broader commitment to
embedding transparency, accountability, and resilience into modern global
financial systems. Rather than relying on a single label, the future of climate
finance- both globally and in India- demands integrated approaches that
prioritize long-term impact over optics.
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