Canadian sustainable bond issuance contracted sharply last year: ISF report

Amid challenging economic conditions and some pullback from ESG investing, the Canadian sustainable bond market suffered a sharp contraction in issuance last year, according to a new report from the Institute for Sustainable Finance (ISF).

Last year, issuance of Green, Social, Sustainability and Sustainability-Linked (GSS+) bonds fell to US$17.47 billion, down 30.3% from 2024. And a particular issue is the market’s continued reliance on a narrow base of repeat issuers: just 21 unique issuers completed deals in 2025, and only one was a debut entrant. Canada's share of global GSS+ issuance fell to 1.7%, down from 2.4% in 2024, as it experienced a steeper decline than the broader 2.6% global slowdown.

“These are difficult times for bond markets in general with trade instability and turmoil in the treasury markets. Plus we’re seeing a few spillovers in Canada of anti-ESG politics in the U.S.,” said ISF Director of Research Yrjö Koskinen. “But even so issuance in Canada is lagging. We need to figure out why new private issuers aren’t entering the market and work to address those barriers.”

These financial instruments remain important for financing the social and environmental priorities of Canadians, from clean power generation for data centres to economic development for Indigenous communities. And they are important to investors for meeting sustainable investing commitments. There are significant opportunities to scale the market outlined in the report.

“The Canadian Sustainable Bond Market Report, Third Edition” is being launched today at the Responsible Investor Association Conference in Toronto.

Key Findings:

• Green bonds continued to dominate the market, representing roughly 86% of total issuance; sustainability bonds made up most of the remainder as social bonds nearly vanished. Sustainability-linked bonds were entirely absent from the 2025 market.
• Clean energy, clean transportation and green buildings together accounted for nearly 80% of disclosed use-of-proceeds allocations, while climate adaptation projects received only about 1%, continuing a persistent mitigation-over-adaptation gap in the market.
• Canada has still yet to issue its first clearly labelled transition bond, a segment that has been growing in some jurisdictions and used to invest in reducing emissions in heavy industrial sectors.
• Indigenous-led issuance was a bright spot: Indigenous public financing institutions accounted for a growing share of sustainability bond issuance.
• The report sets out three priority actions for policymakers and market participants: sustaining momentum on Canada's sustainable investment taxonomy, building a centralized GSS+ bond database, and building issuer and investor literacy to broaden participation beyond a small group of repeat issuers.

“One of the most encouraging signals in the 2025 data was about who’s showing up, even as overall activity slowed down. Indigenous-led issuance moved the needle this year, showing that Canada’s capital markets are genuinely opening up,” said ISF Research Associate Apoorva Hegde.

Building on the recommendations set out in the First and Second Editions, and informed by the developments observed in 2025, the report sets out four priority actions for policymakers and market participants:

1. Sustain momentum in the ongoing development of voluntary climate investing guidelines, or a taxonomy. Labelled bonds are a key use case, and a taxonomy would help issuers and investors identify credible green and transition investments.
2. Build a centralised, publicly accessible GSS+ bond database consolidating issuance information, post-issuance reporting, and alignment with the forthcoming Canadian taxonomy. Developed with input from market participants, it would provide a common reference source for issuers, policymakers, researchers, and the general public.
3. Strengthen issuer and investor literacy to broaden participation, particularly among smaller municipalities, Indigenous organisations, and small and mid-sized businesses.
4. Introduce federal subsidies to offset upfront issuance costs for smaller, first-time issuers, drawing on the Japanese and Singaporean precedents.

“The sustainable bond market, measured by issuance amount, is still driven by repeat public-sector issuers. There’s a real need to broaden the issuer base and encourage more corporates into the market,” said Yingzhi Tang, ISF Senior Research Associate. “Green bonds also remain dominant. Once Canada’s taxonomy is in place, we could see the emergence of a transition bond market, opening up new opportunities to finance credible transition activities.” 

Download and read the full report, "The Canadian Sustainable Bond Market Report, Third Edition".