Fixed income assets are a core component of any charity’s long-term investment portfolio, typically representing around 20% to 40% of the overall allocation, depending on the charity’s objectives, risk tolerance and spending needs. Bonds can serve as a source of income while helping to smooth out overall investment returns through diversification.
Like conventional bonds, sustainable bonds offer diversification benefits and recurring income, but can also provide more transparency to investors regarding the use of proceeds. With sustainable bonds, eligible projects or project categories for financing are typically outlined in the issuer’s bond framework. This allows investors to select bonds that more closely align with their values, mission, charitable objectives and ethical considerations. Importantly, sustainable bond issuances typically require issuers to publish annual progress reports detailing allocation efforts and measurable impacts, which increases accountability.
Why are sustainable bonds important?
Sustainable bonds can play an important role in mobilising additional capital to help support progress towards the UN Sustainable Development Goals (SDGs) and climate targets. Many sustainable bond issuers (eg supranational organisations, regional and national development banks), directly align their green, social or sustainability Bond Frameworks (which include eligible project categories) to the SDGs.
The SDGs are a set of 17 global goals adopted by all UN member states with the aim of addressing the world’s most pressing challenges – from poverty, malnutrition and health resilience, to food security, education, digital transformation, climate change and biodiversity loss, among others. In its 2025 Sustainable Development Goals Report, the UN highlighted that notable progress has been made in a number of areas over the past decade, but the pace of change remains insufficient. According to the report, one in 12 people still experience hunger, and billions lack access to clean water and sanitation. At the same time, according to UNESCO, over 250 million children are missing out on education.
Continuing to fund projects that support the SDGs is of critical importance, particularly in the context of rising geopolitical tensions, and a growing funding gap. A recent Organisation for Economic Co-operation and Development (OECD) report found that if the SDG financing gap continues to grow at its 2015-2023 rate, it will reach $6.4tn by 2030.
Overview of the sustainable bond market
Since the first social and green bond issuances around 20 years ago, the sustainable bond market has come a long way, supported by the adoption of the SDGs and the Paris Agreement on climate change in 2015, which prompted many governments to set emissions reduction targets and gradually encouraged corporates to follow suit. The establishment of the International Capital Market Association (ICMA) guidelines for the issuance of sustainable bonds (first introduced for green bonds in 2014) helped attract a broader investor base, spurring further growth in sustainable bond issuance.
The sustainable bond universe now includes not only social and green bond categories, but also sustainability bonds, which finance a mixture of environmental and social projects; blue bonds, which specifically target marine and ocean-based environmental projects; orange bonds, which focus on projects that support women and girls worldwide; and sustainability-linked bonds, which link the performance of the bond to specific ESG or sustainability targets outlined by the issuer.
Overall, total global sustainable bond issuance reached $1.1tn in 2024, marking a 5% increase from the previous year. The cumulative amount of green, social, sustainability and sustainability-linked bonds issued in the market has surpassed $6tn. Sustainable bond issuance is expected to total $1tn this year, according to Moody’s, broadly in line with 2024, despite policy shifts in the US.
Sovereigns, supranational organisations and agencies (SSAs) represent 32% ($1.9tn) of the cumulative sustainable bonds issued. At the regional level, Europe has consistently accounted for the lion’s share of the issuance over the years and represented 45% of volumes in 2024. Asia Pacific issuers represented 26%, followed by the US at 16%.
Green bonds are the most established category, accounting for 57% of all sustainable bond issuance, followed by social bonds, which account for around 12%. Proceeds from green bonds help finance wind turbines and solar farms, smart grids, energy-efficient buildings, wastewater treatment plants and other important environmental projects worldwide. Meanwhile, social bonds support global immunisation efforts, education and healthcare provisioning, food security, job creation, clean water and sanitation, safe housing projects and other key initiatives.
Assessing sustainable bonds
The adoption of more standardised frameworks for the issuance of sustainability bonds (such as the ICMA guiding principles mentioned earlier) allows investors to gain more comfort around the comparability and credibility of the issuances. ICMA guiding principles for green, social and sustainability bonds are voluntary and represent current best practice in the industry by promoting transparency and disclosure. The four core components of the ICMA principles are: 1) use of proceeds; 2) process for project evaluation and selection; 3) management of proceeds; and 4) reporting. ICMA recommends that issuers appoint an external reviewer to assess their bond framework.
Most institutional investors look to ensure the issuer’s bond framework aligns with ICMA principles as the minimum requirement for considering a sustainable bond for inclusion into their ESG or sustainability-focused strategies. In Europe, Regulation (EU) 2023/2631, applicable from 21 December 2024, lays down requirements for bond issuers which wish to use the designation European Green Bond or EuGB. This further strengthens the integrity, credibility and transparency of the sustainable bond market by embedding EU taxonomy alignment, introducing standardised disclosure templates and mandating independent external reviews (with European Securities and Markets Authority oversight).
Conclusion
The sustainable bond market is well-established, supported by investor demand, a shifting regulatory landscape in Europe and the growing need for cleaner energy sources, driven by the AI boom. It now offers investors improved transparency, standardised frameworks, and clearer alignment with the SDGs, the EU taxonomy, or both.
Sustainable bonds are mostly issued by sovereigns, supranationals or government agencies (SSAs), many of which have higher credit ratings than the largest sovereign issuers. As a result, charity investors can gain access to high quality assets, while also supporting important environmental and social initiatives worldwide, which align with their organisation’s values, and can have meaningful measurable real-life impacts.
This article is designed to be thought leadership content, to offer big picture views and analysis of interesting issues and trends that matter to our clients. It is not designed to be taken as the preferred view from Barclays Private Bank, expert advice, investment advice or a recommendation, and any reference to specific companies is therefore not an opinion as to their present or future value or broader credentials (ESG or otherwise). Reliance upon any of the information in this article is at the sole discretion of the reader. Some of the views and issues discussed in this article may derive from third-party research or data which is relied upon by Barclays Private Bank and may not have been validated. Such research and data are made available as additional information for the reader where appropriate. Any reference to specific organisations and individuals should not be viewed as an endorsement from Barclays Private Bank.
Alina Lobacheva is a sustainable portfolio manager and Olivia Lewis director, charities and not-for-profits, at Barclays Private Bank.
Charity Finance wishes to thank Barclays Private Bank for its support with this article
