Executive Summary

US IG/HY green and sustainable bond primary issuance is up vs YTD 2025, driven by data center/communications, financial institutions, and energy/utilities issuers.

We continue to see framework-finance and labeled debt, as well as innovation in both structure and/or use of proceeds, as a relevant tool to differentiate/market primary offerings, in what looks to be a heightened capex cycle.

New Issuance Volume & Performance

Halfway through 2026, we’ve seen a resurgence of issuance, compared to 2025, as more US corporates come to market with offerings intended to fund green, sustainable, and social use of proceeds. Year-to-date green and sustainable bond issuance is up over 130% compared to the same time last year, and broader US IG primary volume is also up 34%.

Investment grade green/sustainable bond issuance this year has been dominated by data center issuers, which represent almost half of US IG new issue benchmark green/sustainable bond volume. IG utilities and renewable energy developers represent a little under 30% of green/sustainable debt issuers, as financial services and industrials round out the remainder. YTD US high yield green/sustainable bond issuance is also up, driven primarily by data center/hyperscaler funders. Alternative funding mechanisms in private credit, CMBS, and SPV/JVs have also provided optionality, as the IG and HY debt markets experience pressure from hyperscaler and AI-related capex.

In terms of primary performance, New Issue Concessions and book subscriptions on US IG Green and Sustainability bonds, on average, now consistently mirror those of non-labeled debt. It’s clear that any potential pricing advantage that labeled debt once held has since been reduced.

However, US IG Green/Sustainable bonds in the secondaries have outperformed the broader IG market, with the strongest performance in the short (2YR-5YR) and long end (30YR) of the curve.

Opportunities to Innovate: Structure and Theme

One area we see as an opportunity for issuers to leverage and innovate is in medium term notes. A little less than 10% of this year’s total green/sustainable US IG and HY volume is medium term notes, issued primarily by financial institutions, who, in many cases, use them to fund their green loan portfolios/balance sheets.

Often issued off a shelf, an MTN program allows an issuer to raise debt through selling agents or regional dealers, helping to enhance distribution and attract reverse inquiry, while offering optionality to issuers and investors in areas like maturity, size, callability, and currency. Many organizations find it challenging to determine the amount of Use of Proceeds needed to warrant a benchmark-size offering, but nonetheless, have related “green” or “sustainable” spend.

A non-financial corporate Green/Sustainable Medium-Term Note program could be a potential solution, helping issuers come to market at the time, size, and currency needed. It’s clearly been a space where FIGs have been active (printing over $2bn YTD 2025 and $1.43bn so far this year).

ProSec—America’s Industrial Rebuild

Why is it important to Corporate & Sustainable Finance?

• Reshoring six capital-intensive industries, while retooling the input layers beneath them, will drive record U.S. capital demand.
• As public and private capital converge on priority sectors, the capital pool for everyone else narrows.
• Competition for capital will increase costs – stress test funding plans against structurally higher rates over the next 5 years.

Another space we see a chance to innovate is thematically. The reemphasis on domestic strategic resilience as a permanent component of national security — what we’ve dubbed ProSec — is a theme that has gained traction amongst policy makers, investors, and the broader populace as geopolitics, tariffs, and supply chain constraints drive inflation and raise concerns about the availability of critical components/services. Several components of ProSec like energy security, site hardening, and resiliency also align with sustainability. Translating this theme into a framework (like green/sustainability/social bonds have) that an issuer can not only leverage to fund investments, but also support America’s industrial rebuild, is one possible example of innovation — and it is relevant across issuer types (FIGs, Corporates, Sovereigns, and State/Locals).

We’ve already seen some innovation this year with Xylem’s inaugural blue/green framework, a first for a US IG corporation to market debt designated for investments in products and services that provide clear environmental and economic benefit (Academy was Co-Manager on their 7YR & 10YR bonds). We continue to see Use of Proceeds earmarked for governance (specifically investments in cybersecurity, responsible AI, and site hardening) as the next evolution — especially given the recent bout of cyber-attacks on US water and wastewater systems — with seven in the past month.

Differentiation in a Crowded Landscape

In summary, as AI infrastructure and related capex look to pick up, and potentially saturate the market, we see this tool to differentiate issuances as one of the clearest benefits of labeled bonds.

The label itself and marketing, however, are likely not going to be enough, and we will need to see innovation in both structure and/or use of proceeds as other key differentiators. Thematically, the reemphasis on domestic critical production (ProSec) could also be an option, in which issuers could market debt where proceeds align with America’s strategic industries and priorities.

Sources: Credit Flow Research, Bloomberg, BondwayAI, and internal data

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