Sustainable bank bond supply set for further growth in 2027
Lead — The desk interprets the increasing sustainable bank bond supply as indicative of robust demand for ESG assets and a sign of shifting capital flows towards Europe, per the full note from ing-think. With sustainable bond issuance projected to reach €100 billion in 2027, driven by both higher sustainable lending growth and significant redemptions, this trend highlights a constructive environment for green investments. Our coverage remains neutral to slightly bullish on this theme, anticipating a favorable backdrop for EUR-denominated assets, particularly given no immediate economic shocks or policy retractions on the horizon.
What the desk is arguing
The desk believes that the projected growth in sustainable bank bond supply, expected to hit €100 billion in 2027, reflects a burgeoning market for ESG assets driven by lasting investor demand. Per the full note from ing-think, despite regulatory easing in Europe, banks have aggressively issued sustainable bonds to refinance green projects, contributing to a record near €86 billion in issuance by mid-October 2026.
Additional evidence points to a marked increase in issuance forms, particularly within Tier 2 and senior non-preferred structures, as institutions adapt to market dynamics. The report highlights that the bulk of the sustainable supply—€76.6 billion—was earmarked to refinance green assets, suggesting an entrenched preference for environmentally conscious investments among institutional investors.
Where it sits in our coverage
The current consensus target aligns at 1.075 for the EUR/USD, with the following firm projections: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
Our view positions itself towards the higher end of this spectrum, indicating an expectation that as sustainable supply grows, so too will interest in EUR-denominated bonds. Thus, we see potential for appreciation in the currency, suggesting a favorable risk-reward ratio in upcoming months.
How other firms see it
Group aligned firms like jpmorgan lean towards a bullish outlook on EUR/USD due to the expected sustainable bond growth and its appeal to ESG-focused investors. Conversely, firms such as bofa maintain a more cautious stance, potentially anticipating regulatory backtracking or market pushback against high issuance levels.
In assessing the broader market implications, the anticipated trajectory of EUR/USD showcases the influence of sustainable finance trends, with emerging themes around ESG investing shaping investor sentiment and market behavior entering 2027.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Sustainable bank bond supply expected to reach €100 billion in 2027
- 02Issuance includes significant Tier 2 and senior structures
- 03Investor demand for ESG assets remains strong despite regulatory changes
- 04Trend reflects diverging financial strategies between European and North American markets
Market implications
Watch EUR/USD closely for signals of appreciation, particularly as the sustainable bond issuance landscape evolves. The level of €1.075 may serve as a crucial pivot point, with any substantial changes in green finance dynamics likely influencing investor behavior and currency position.
Risks to this view
Should European regulators tighten ESG-related regulations or if there are significant shifts in investor sentiment resulting in reduced demand for sustainable bonds, this could invalidate the bullish outlook. Any unexpected economic data or geopolitical developments may also undermine confidence in the sustainability narrative, warranting caution.
Articles Sustainable bank bond supply set for further growth in 2027 Published 10:06 Credit Financial Institutions Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Sustainable bank bond supply is close to reaching a record in 2026, despite Europe’s ESG simplification agenda. We expect another increase to €100bn in 2027, supported by sustainable lending growth, higher redemptions and resilient investor demand Maureen Schuller Sustainable bank bond supply is blooming, nearing a record in 2026 Banks issued an unexpectedly large amount of sustainable debt this year despite Europe’s ESG deregulation efforts. Up to mid-October 2026, they issued more than €86bn in sustainable bonds across different instrument types, up by almost €20bn from the same period last year.
This was a surprisingly strong increase given that favourable primary market conditions offered issuers little greenium, despite continued evidence that sustainable bonds attract higher investor demand, as reflected in stronger oversubscription rates. This suggests that the availability of sustainable assets was not a meaningful constraint on banks' sustainable debt issuance, thanks to higher redemptions and sustainable lending growth. Issuers are also increasingly directing ESG bond issuance towards European capital markets, often at the expense of North American markets, reflecting the growing divergence in political and regulatory priorities between the two regions.
The bulk of the YTD supply (€76.6bn) (re)financed green assets, with green supply up €25bn from 2025. Instead, issuance in social and sustainability formats did not exceed €9.6bn, trailing last year’s supply by €4.5bn. All instrument types, from secured to unsecured to subordinated, contributed to the higher ESG supply volumes.
However, sustainable T2 and bail-in senior (senior non-preferred and HoldCo) issuance increased particularly strongly, as the funding cost advantage from sustainable issuance was better for these instruments than for covered bonds and preferred senior debt. Issuance under the European Green Bond Standard (EuGBS) rose from €2.5bn to almost €12bn YTD. For many banks, ICMA-aligned green bond issuance remained the more practical option as it allows them to finance a broader pool of assets, rather than fully commit the bond proceeds to Taxonomy-aligned activities.
This is particularly relevant when non-EU assets are financed, for which the EU regulation-based do-no-significant-harm requirements (DNSH) are difficult to apply. That said, with the revisions to the EU Taxonomy’s technical screening criteria around the corner (expected in 4Q 2026), we expect more banks to inaugurate European Green Bond Programmes, as more types of green assets will become available due to the EU’s simplification agenda. Sustainable bank bond supply will reach €100bn in 2027 €bn Includes only euro-denominated bank bonds with a minimum size of €250m Source: IGM, ING "> Includes only euro-denominated bank bonds with a minimum size of €250m Source: IGM, ING What is driving growth in ESG supply in 2027?
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