Trump Campaign Against ESG Hits Emerging-Market Green Bonds

The backlash in the US on climate issues is hitting the ability of many emerging markets to raise funds for environmental projects.

Their sales of green bonds have fallen by about a third in 2025 to $8 billion, the slowest start to a year since 2022, when excluding China’s issuance, according to data compiled by Bloomberg. The drop comes despite an 18% increase in overall bond issuance from emerging markets to $225 billion.

The development follows the US exiting from the Paris Agreement on climate targets and from a leading role in an energy transition partnership for South Africa, Indonesia and Vietnam. US President Donald Trump’s Republican Party has also sought to ban strategies to invest on an environment, social and governance basis, causing many Wall Street firms to back away from their climate commitments.

The moves are complicating the efforts of emerging economies to gain financial help from richer nations to transition away from coal-fired power and polluting industries. While only Argentina has threatened to withdraw from the Paris Agreement, the effects of the US shift can already be spotted in the bond market.

“The conversations around what types of green investments will come to market, who’s interested, was slowing down last year,” said Jeff Grills, head of US cross-asset and emerging-markets debt at Aegon Asset Management. “Now what’s happened is with the new administration, it’s almost evaporated.”

This year, Wells Fargo & Co. became the first major bank to abandon targets for emissions from financing, following a series of Wall Street lenders withdrawing from the Net-Zero Banking Alliance, the banking industry’s largest climate alliance. Since Trump returned to the White House, US companies have all but abandoned green bonds, once touted as a way for corporations to help fix the planet.

While the market for EM green bond deals is still running, almost 80% has come from investment-grade issuers such as Saudi Arabia. It sold a €1.5 billion debut green euro bond in February to help fund an ambitious economic-transformation plan, pulling in over €7 billion of investor orders.

Historically, emerging economies — with the exception of China and a few outliers like Poland and Chile — have lagged the world in turning to the bond market to fund projects to cut greenhouse gas emissions. Many nations, particularly in Africa, have yet to raise money this way.

Now, non-investment grade issuers are voicing disappointment. Angola has already worked on a framework for debt that relates to ESG goals, but has been underwhelmed about the potential for getting cheaper borrowing costs via such bonds, according to Finance Minister Vera Daves de Sousa. This so-called greenium, which has been common in the past, relies on strong demand from investors.

“Something that makes us less happy is we realized that the greenium is not so good as what it should be,” Sousa told Bloomberg in New York last month. “But we’re still committed to test it. We’ll start locally and after that we will build a track record to do it internationally,” she said. The comments echo sentiment by corporates on a fading greenium.

“The real issue is that investors are no longer paying a premium for these issues,” said Jennifer Gorgoll, a portfolio manager for emerging-market corporate debt at Neuberger Berman. “Now the greenium is only 0-5 basis points, so there really is no longer a spread benefit to companies to issue a green bond.”

The drop in interest from US funds means a shift in global money flows, with Europe and China playing a bigger role in sustainable investments. According to data by Morningstar Direct, funds domiciled in Europe and identified as pursuing ESG goals attracted $3.5 billion of inflows in the first two months of the year. In the US, meanwhile, such funds suffered about $3.1 billion of client outflows.

“The demand from the European side continues to be very strong and the direction is very different than the direction that is being taken in the US,” said Steffen Reichold, the New York-based head of ESG at Stone Harbor Investment Partners, which launched an EM climate impact fund in December.

Sustainable investors are still encouraging EM borrowers to tap the market.

“It is one thing to say you have good governance and you also have a decarbonization plan, but having a green bond issuance plan to back that up makes your narrative more compelling,” said Alexis de Mones, a fixed-income portfolio manager at Ashmore Group Plc. 

With assistance from Jorgelina do Rosario and Natasha White.

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