Key takeaways
- Sustainable-finance fund flows in 2026 are net-positive again after two years of outflows, but the composition is different — broad ESG funds out, thematic climate funds in.
- Real-economy issuance of sustainability-linked bonds has overtaken green bonds for the first time, signalling a market preference for outcome-based instruments.
- Disclosure regimes are converging; ISSB-aligned reporting is becoming the default in major markets through 2026.
The narrative around sustainable finance has shifted markedly since the 2023–2024 ESG-backlash period. Net flows are positive again, but the products winning are not the ones from the 2021 boom. This piece looks at the structural shifts.
What changed in 2025 {#section-1}
The post-2024 reset was about specificity. Broad ESG mandates lost ground to thematic, outcome-linked vehicles. Climate-transition funds, biodiversity-themed bonds, social-bonds tied to specific KPIs all gained share.
Where flows actually went {#section-2}
Sustainability-linked bonds — instruments where the coupon adjusts based on whether the issuer hits its sustainability targets — saw $480bn of issuance in 2025, surpassing green bonds for the first time. The market is voting for accountability mechanisms over use-of-proceeds labelling.
What to expect through 2026 {#section-3}
Three structural items to track: ISSB adoption deadlines in major markets, the EU’s CSRD second-wave reporting cycle, and the slow consolidation of ESG ratings into a smaller set of credible providers.