This research report explores an evolving topic relating to sustainability. It reflects research conducted by and contributions from S&P Global Ratings' sustainability research and sustainable finance teams as well as our credit rating analysts (where listed).
Key Takeaways
- We project U.S. municipal sustainable bond issuance will follow the broader municipal market, although there is considerable uncertainty around this baseline.
- Potential changes to tax-exemption status for municipal bonds could slow the market as a whole, as could changes in policy and sentiment. For more information on market trends, please see: "How Could A Second Trump Term Affect U.S. Credit?" published Nov. 7, 2024, and "Global Sustainable Bond Issuance To Hold Steady At $1 Trillion in 2025," published Feb. 5, 2025, both on RatingsDirect.
- Green energy and transportation will continue to propel the market as certain states enact their mandates for renewable power supply and associated capital needs, supporting momentum in green bond financing.
- We expect large repeat issuers to continue to embrace sustainable bonds and drive the market. (Please see "Sustainable Bonds Defined" at the end of the article.)
Chart 1
The 2024 Municipal Sustainable Bond Market: Three Key Highlights
1. Green bonds surpassed social bonds for the first time since 2020
- During a record year where conventional municipal bond market issuance exceeded $507.6 billion, municipal sustainable bond issuance lagged for the majority of 2024 until the last two months of the year, when over $12 billion was issued to a year-end total of $54.3 billion.
- This represents a 28% increase year over year.
- Green bonds nearly doubled at 41% growth year over year and continue to hold the majority at $28.2 billion.
- Social bonds showed slower growth at 25% while sustainability-labeled bonds declined by 7%.
- Over the past five years, green bonds made up 48% of total U.S. municipal sustainable bond issuance with social bonds making up 36%.
Chart 2
2. California and New York continue to dominate the market while U.S. sustainable bond issuance declines in some states
- Approximately 23% of 2024 transactions were issued in the final two months of the year, with the New York Transportation Development Corp. and the California Community Choice Financing Authority issuing transactions in excess of $1 billion and $4 billion, respectively.
- They were the two largest issuers in 2024 and represent the states with the largest amount of U.S. municipal sustainable bonds issued in 2024.
- Over the last few years, certain states have passed or are considering legislation that restricts or could be interpreted as restricting public issuers' ability to issue sustainable bonds.
- Four states in 2024 saw the volume of publicly issued, U.S. municipal sustainable bonds drop to zero from positive levels in the prior year: Idaho, Louisiana, Mississippi, and South Carolina.
Table 1
| Top 10 largest U.S. municipal sustainable bond issuers - 2024 | ||||||
|---|---|---|---|---|---|---|
| Issuer | Par (mil. $) | % of total issuance | ||||
| California Community Choice Financing Authority | 7,758 | 14.6 | ||||
| New York Transportation Development Corp. | 4,496 | 8.4 | ||||
| National Finance Authority* | 1,974 | 3.7 | ||||
| New York MTA* | 1,732 | 3.2 | ||||
| Triborough Bridge And Tunnel Authority | 1,658 | 3.1 | ||||
| Illinois Housing Development Authority | 1,398 | 2.6 | ||||
| New York City Housing Development Corp. | 1,368 | 2.6 | ||||
| Los Angeles Unified School District | 1,100 | 2.1 | ||||
| Connecticut Housing Finance Authority* | 1,054 | 2.0 | ||||
| Maryland Economic Dev Corp*. | 1,011 | 1.9 | ||||
| Top 10 largest U.S. municipal sustainable bond issuers - 2024 | 23,549 | 44.2 | ||||
| *New compared with 2023 ranking. | ||||||
Chart 3
Chart 4
Chart 5
3. Affordable housing remains the primary purpose of U.S. municipal sustainable bonds
- State and local government issuers account for the largest portion of U.S. municipal sustainable bond issuance. State issuers predominantly issue for affordable housing, while local government issuers also issue for green energy, green buildings, and various other purposes.
- Sustainable bonds for green buildings are issued by education, transportation, health care and utility, and housing issuers.
Chart 6
Chart 7
Deep Dives By Label: 2020-2024
- Green bonds have been relatively well represented across most U.S. states and reflect the largest volumes over the past five years.
- Social bonds make up a slightly lower volume as a proportion of the U.S. municipal sustainable bond market since 2020, although they also remain evenly distributed across the U.S.
- New York issuers make up the majority of sustainability bonds, most of which are for affordable housing.
1.Green bonds
Chart 8
Chart 9
2. Social bonds
Chart 10
Chart 11
3. Sustainability bonds
Chart 12
Chart 13
| Affordable housing also drives sustainability bond issuance | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Bil. $ | ||||||||||||
| Other | Affordable housing | Green buildings | Green transport | Water | ||||||||
| 2020 | 0.17 | 3.59 | 0 | 0.05 | 0.23 | |||||||
| 2021 | 0.52 | 4.69 | 0.9 | 0.93 | 0.21 | |||||||
| 2022 | 0.18 | 4.14 | 0.5 | 0.3 | 0.64 | |||||||
| 2023 | 0.44 | 3.64 | 1.67 | 1.98 | 0.47 | |||||||
| 2024 | 0.95 | 4.54 | 1.72 | 0.1 | 0.32 | |||||||
| *Others includes education, energy efficiency, green energy, land conservation, and mixed. Source: S&P Global Ratings. | ||||||||||||
Issuance Characteristics: Five Key Highlights
1.Average U.S. municipal sustainable bond issuance size remains triple the average municipal bond transaction
- U.S. municipal sustainable bond issuance size remains nearly triple the average municipal bond transaction.
- In 2024, the average U.S. municipal sustainable bond par amount was $154 million, or 2.7x the average municipal par amount, compared with 2.8x in 2023.
- Sustainable bonds made up 10.7% of the total municipal bond market in 2024, in line with prior years and with the overall sustainable bond market.
Chart 14
2. The number of first-time issuers has decreased significantly since 2021
- An issuer's use of sustainable bond labels may depend on economic considerations, policy direction, and whether the disclosure and administrative burden that accompany labeling brings a pricing or other advantages.
- New issuers made up 4% of U.S. municipal sustainable bond issuance in 2024 ($2.4 billion). The largest shares of new issuers in 2024 were in California (36% of new issuers), Oregon (13%), and Michigan (10%).
- We expect recurring large issuers to continue to embrace sustainable bonds and spur the market, as first-time issuers fell by 81% in 2024 to 34 from 184 in 2021.
- We believe shifts in policy and sentiment are likely to generate continued declines in first-time issuance in 2025.
Chart 15
3. New money propels issuance
- New money continues to lead municipal sustainable issuance, reaching $40.3 billion in 2024.
- High interest rates likely will continue to limit refinancing activity through at least the first half of 2024.
- However, expected policy changes could temper U.S. municipal sustainable bond issuance in 2025.
- Issuers of sustainable bonds take advantage of refunding opportunities as they go to market to raise new funds, with mixed use of proceeds more common than in the broader U.S. municipal market.
Chart 16
4. Exactly 50% of labeled bonds received third-party reviews
Chart 17
Chart 18
Chart 19
5. Since 2019, the number of transactions exceeding $1 billion has significantly increased
- In 2024, nine U.S. municipal sustainable bond transactions exceeded $1 billion, compared with three in 2023.
Chart 20
Sustainable Bonds Defined
For the purposes of this analysis, we define "sustainable bonds" as U.S municipal debt issuance whose use-of-proceeds has been labeled as Green, Social, Sustainable or Sustainability-Linked in offering documents, regardless of whether the use of proceeds has been reviewed by a second party for alignment with certain third-party published sustainable finance principles and guidelines. Our use of the terms "green bonds," "social bonds," "sustainability bonds," and "sustainability-linked" also aligns with this definition. S&P Global Ratings compiled the data used in this analysis from third-party sources, including CBI and MuniOS.
Related Research
- Sustainable Bond Outlook 2025: Asia-Pacific Issuance Could Hit Record High, Feb. 23, 2025
- Sustainable Bond Outlook 2025: Global Issuance To Reach $1 Trillion, Feb. 26, 2025
- Sustainable Bond Outlook 2025: Middle East Issuance To Remain High, March 4, 2025
- Sustainable Bond Outlook 2025: Latin America Leading The Way For Nature Financing, March 10, 2025
This report does not constitute a rating action.
| Primary Credit Analysts: | Kaiti Vartholomaios, New York + 1(212) 438 0866; kaiti.vartholomaios@spglobal.com |
| Alex Louie, Englewood + 1 (303) 721 4559; alex.louie@spglobal.com | |
| Bryan Popoola, Washington D.C. +1 202 615 5962; bryan.popoola@spglobal.com | |
| Secondary Contacts: | Jessica L Pabst, Englewood + 1 (303) 721 4549; jessica.pabst@spglobal.com |
| Kurt E Forsgren, Boston + 1 (617) 530 8308; kurt.forsgren@spglobal.com | |
| Sarah Sullivant, Austin + 1 (415) 371 5051; sarah.sullivant@spglobal.com | |
| Research Contributors: | Yogeshwar Suresh, CRISIL Global Analytical Center, an S&P affiliate, Mumbai |
| Divya Bachhawat, CRISIL Global Analytical Center, an S&P affiliate, Mumbai |
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