Policy makers can build on 2024 rebound in sustainable bonds: ISF report

Canada’s sustainable bond market delivered its strongest performance to date in 2024, signalling renewed momentum in a segment that is becoming central to financing the country’s transition to a low-carbon economy. After a few years of softer activity, new analysis from the Institute for Sustainable Finance shows issuance surged to US$25.08 billion — a 68.5 percent jump over the previous year — driven by returning issuers and steady investor demand for sustainable assets.

Read and download the report, “The Canadian Sustainable Bond Market Report, Second Edition. 2024: A Record Year and a Strong Comeback for Sustainable Bond Issuance” for a detailed analysis including trends in issuance for each bond type, sector breakdowns, use of proceeds and more.

While the strong rebound detailed in the report is in-line with global trends, Canada remains a relatively small player on the international stage, with roughly 2.4% of global sustainable bond issuance in 2024, and around 2% of cumulative issuance to date. The right mix of policy measures and market conditions will be required for Canada to ensure confidence in the market and build the scale required to address environmental and social issues.

“We need to grow Canada’s sustainable bond market to finance environmental and social objectives that are important to Canadians,” said Yrjö Koskinen, ISF’s Director of Research. “It will be particularly beneficial to see transition bonds finally take off in Canada, given the potential to finance reducing carbon emissions from heavy industry and the oil and gas sector.”

“This report and its updates will be a vital resource for market participants and policy makers and spur a much-needed conversation about how to accelerate the sustainable bond market,” said ISF Director Maya Saryyeva. “Its recommendations can form the basis for further growth which we’ll be tracking in the coming months and years.”

“Canada’s sustainable bond market delivered a record year in 2024. With new federal commitments on a taxonomy and a sustainable bond framework, the foundations for long-term growth and credibility in the market are strengthening,” said ISF Senior Research Associate Yingzhi Tang.

In 2024, green bonds remained the dominant segment, accounting for 82.5% of total issuance, followed by sustainability bonds (11.3%), sustainability-linked bonds (3.4%), and social bonds (2.7%). Although no transition bonds have yet been issued domestically, both government-led and issuer-driven initiatives are advancing frameworks to support credible transition finance.

The report makes five key policy recommendations:

1. Advance voluntary made-in-Canada sustainable investment guidelines (otherwise known as a taxonomy), aligned with international standards to provide policy certainty and support transition finance.
2. Mandate standardized reporting and assurance for proceeds allocation and impact, with phased-in requirements to support issuer readiness.
3. Expand sovereign and sub-sovereign issuance, piloting innovative structures such as transition bonds to set benchmarks and spur private-sector activity.
4. Develop a centralized GSS+ (green, social, sustainable and sustainability-linked) bond database to improve transparency, comparability, and policy evaluation.
5. Build issuer and investor literacy to broaden participation, particularly among smaller municipalities, Indigenous organizations, and small and mid-sized businesses.

There is some policy progress to build on. As announced in the federal budget, Ottawa has begun work on a national taxonomy and a federal sustainable bond framework. Along with the other measures recommended by ISF’s report, this can help strengthen Canada’s position in sustainable finance, close existing policy and data gaps, and unlock capital for the transition to a low-carbon, competitive economy.