Bloomberg Professional Services
This analysis is by Bloomberg Intelligence ESG Senior Strategist Chris Ratti and ESG Strategy Associate Jia Jun Bar. It appeared first on the Bloomberg Terminal.
Sustainable bonds globally outperformed conventional investment-grade corporates in spread terms in 1Q, despite headwinds from tariffs and anti-ESG pressure from the Trump administration. The Bloomberg Global Corporate Green Social Sustainability Bond Index tightened vs. conventional corporates. The most notable green premiums were in financials, while industrials and materials saw the largest discounts due to higher carbon footprints. The Americas saw green bond premiums (greeniums) increase, particularly in energy and health care, while industrials remained the most discounted. The EMEA region ended 1Q at a discount, with greenium in sectors such as health care and energy, driven by energy-security initiatives. Asia-Pacific bonds were slightly discounted, but the materials sector moved into premium territory.
Global green-bond premiums improve in 1Q despite tariff concerns
Green-bond spreads worldwide through 1Q moved wider, though not as much as high-grade corporate bonds. Green spreads have moved in line with corporates on a 12-month normalized basis looking back over five years, but they recently decoupled, with green spreads trailing investment-grade corporates as they moved higher. We expect green spreads could remain lower, as strong demand has supported spreads. The Inflation Reduction Act also has strong cross-party support despite President Donald Trump’s rhetoric and increased volatility driven by back-and-forth on tariffs.
Tariffs test green bonds, Americas hold strong, EMEA lags
Despite the volatility and increase in spreads from tariff fears, the Americas had a green premium during all four quarters of 2024, led by senior bonds. The region regained its premium after losing it early in 2025, ending with a weighted-average premium of 1.7 bps for 1Q. Asia-Pacific has nearly regained its green premium, closing 1Q at a discount 0.6 bps, lower than 4Q24’s discount of 3.2bps. Europe, Middle East and Africa (EMEA) still has the largest discount, though it also improved from the end of 2024, as green-labeled bonds are trading wider than comparable conventional bonds by 2.4 bps. Subordinated green bonds have widened more than conventional bonds in the Americas and Asia-Pacific.
Financials see green benefits; heavy emitters pay the price
Financials ended 1Q with green-bond spreads 1.8 bps lower than conventional bonds on a weighted-average basis. That makes four consecutive quarters where the financials sector had green bonds at lower spreads than conventionals, and the premium expanded from 4Q24, when it was nearly flat. Consumer staples shifted back to a premium of 1.3 bps as of the end 1Q after ending 2024 at a discount of 4.4 bps. The sectors with greater carbon footprints, such as materials and industrials, are trading at the largest discounts to conventional bonds; this gap increased since the end of February after it improved by 9 bps in January and February. This analysis is based on senior bonds in the payment structure and excludes junior and subordinated securities.
Global greenium methodology
Greenium refers to the premium that green bonds fetch vs. comparable conventional bonds. It’s measured by option-adjusted spreads (OAS), where negative reading is a premium. Using the Bloomberg Global Corporate Green Social Sustainability Bond Index, we calculate the greenium for each member by mapping the two closest conventional bonds with the same payment rank in the Bloomberg Global Aggregate Corporate Bond index on either side of the green-bond maturity. Greenium is calculated as the difference between the green-bond option-adjusted spread (OAS) and the interpolated OAS of the two non green peers. We calculate greenium aggregates at market level for each bond payment rank and BICS 1 and BICS 2 sectors using green-index weights. Green bonds with no non-green matches or data are excluded.
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