European green bond issuance rose 36% year on year to a record $250 billion in the first half of 2026, while the region accounted for 58% of global issuance in the second quarter. Europe is also strengthening oversight of the market through new rules for ESG rating providers, proposed restrictions on fossil fuel companies in transition funds and more detailed reporting and carbon-verification requirements.

China expanded the operation of its national carbon market by setting allowance rules for power, steel, cement and aluminium, while ICBC and JinkoSolar introduced financing structures linked to renewable energy and industry ESG standards. Yet Asia Pacific’s share of global green bond issuance fell from 32% to 20% in the second quarter, indicating that progress in market infrastructure and individual transactions has yet to translate into stronger regional issuance.

Read more on the week's key developments:

1. Europe widens green bond lead as Asia Pacific’s share falls to 20%

On 2 September, S&P Global released its Sustainable Bonds Mid-Year 2026 Outlook: Stability in a Maturing Market. The report showed that green bond issuance by European issuers and supranational institutions rose 36% year on year to a record $250 billion in the first half of 2026. Renewable energy continued to dominate the use of proceeds, reflecting the growing convergence of the low-carbon transition and energy security. Moody’s data from late August also showed that global green bond issuance reached a quarterly record in the second quarter of 2026, with Europe accounting for 58% of issuance, up from 44% a year earlier.

The data confirm that Europe has strengthened its position as the world’s largest sustainable bond market. Regulatory frameworks such as the European Green Bond Standard, Corporate Sustainability Reporting Directive and European Sustainability Reporting Standards, combined with strong investor demand, are helping move green bonds into the mainstream. However, growth remains heavily concentrated in green bonds, with social and transition bonds showing divergent performance and continued fragmentation within sustainable finance. On Moody’s measure, Asia Pacific’s share fell to 20% in the second quarter from 32% a year earlier. China and the region’s relative retreat may be linked to domestic interest-rate conditions and issuance timing, making this a trend worth monitoring.

2. Clean energy investment reaches record as emissions remain elevated

The Energy Transitions Commission published its 2026 Energy Transition Monitor, which showed that global clean energy investment reached a record $2.1 trillion in 2025. Solar power, batteries and electric vehicles exceeded expectations, while renewables accounted for 99% of the growth in global electricity generation. The commission reported that global renewable capacity had almost doubled since 2022 and was on track to double again by 2030, but remained about 900 gigawatts short of the COP28 tripling target.

The report presents a mixed picture, with clean energy growing rapidly while emissions have yet to decline. Rising energy demand has left global greenhouse gas emissions broadly stable. Clean power met only 40% of global energy-demand growth, with the remainder supplied by fossil fuels. Recent annual temperatures have exceeded 1.5°C above pre-industrial levels, although the Paris Agreement threshold is assessed over a longer period. The current trajectory could lead to warming of approximately 2.5°C. The findings show that expanding clean energy capacity alone will not be sufficient. Faster progress is also needed in grids, storage, end-use electrification and supporting policy frameworks.

3. China issues carbon allowance plans for power, steel, cement and aluminium

China’s Ministry of Ecology and Environment issued allowance allocation plans for the national carbon emissions trading market covering the power sector in 2025 and 2026 and the steel, cement and aluminium-smelting sectors in 2026. The plans clarify the scope, calculation methods, allocation and compliance rules. The 2026 allocation method for the three newly included sectors maintains the approach used during the initial expansion, while benchmark values for the power sector will be adjusted dynamically. Allowances will continue to be allocated free of charge based on emissions intensity. The lower the carbon dioxide emissions per unit of product, the greater the potential allowance surplus.

This is the first full-sector annual allowance plan since the market’s expansion and the first implementation measure since the 15th Five-Year Plan’s carbon-peaking action set a target of reducing emissions per unit of product by approximately 3% across covered sectors. The plan also clarifies that key emitting entities may use China Certified Emission Reductions to offset part of their 2025 and 2026 compliance obligations. It strengthens carbon constraints on less-efficient production capacity and captive power plants, encouraging the four sectors to reduce emissions at lower cost by rewarding more-efficient producers. It could also lay the groundwork for a future combination of free and paid allocation, although such a transition is not established by the current plan.

4. European Parliament proposes tighter fossil fuel criteria under SFDR transition category

A European Parliament document published on 3 September showed that Parliament is proposing tighter inclusion criteria for fossil fuel companies under the new transition category of the Sustainable Finance Disclosure Regulation (SFDR). Fossil fuel companies would qualify only if they invest more in green activities than in new fossil fuel projects over a three-year period. The position conflicts with EU member states that favour more flexible fossil fuel restrictions, setting up further negotiations over the SFDR reforms.

SFDR is a central part of the EU’s efforts to address greenwashing, and the proposed transition category would influence sustainable fund classifications and capital flows. If Parliament’s position is adopted, it would raise the threshold for high-carbon energy companies seeking inclusion in sustainable funds, requiring clearer evidence of capital being redirected toward green investment. However, it could also widen divisions between stricter and more pragmatic approaches within the EU, affecting the size of the sustainable investment market, companies’ access to capital and global asset managers’ product classifications in the region.

4. EU sets application requirements for ESG rating providers

The EU Regulation on ESG Rating Activities became applicable on 2 July 2026, with the European Securities and Markets Authority (ESMA) responsible for registering and supervising providers. On 1 September, the EU Official Journal published Delegated Regulation (EU) 2026/1119, specifying the information that providers must include when applying for authorisation or recognition. Providers that notified ESMA of their intention to continue operating generally have until 2 November to apply, while qualifying small EU providers may enter a three-year temporary regime.

The framework brings ESG rating providers under common registration and supervision requirements and seeks to improve transparency around methodologies, governance and conflicts of interest. Providers outside the EU must use the applicable equivalence, recognition or endorsement route. The application requirements will increase the information providers must submit to ESMA and could raise compliance costs, particularly for smaller firms. The longer-term effect on competition and consolidation will depend on how the regime is implemented

6. EFRAG drafts 2026 ESRS data point list as EU clarifies CBAM verification

On 28 August, the European Financial Reporting Advisory Group Secretariat released the draft 2026 ESRS Data Point List. It systematically maps disclosure requirements under the revised European Sustainability Reporting Standards and provides operational guidance for companies preparing reports under the Corporate Sustainability Reporting Directive for the 2026 financial year. The European Commission also issued guidance on the verification of emissions and accreditation of verifiers under the Carbon Border Adjustment Mechanism (CBAM), clarifying how emissions will be verified and by whom as CBAM enters its definitive period.

EU sustainability disclosure is moving further into implementation, with more detailed guidance on what companies must report and how the underlying information will be verified. For companies operating in China, the CBAM guidance means affected exporters will need to engage with verification bodies accredited by EU member states and establish traceable emissions-data systems that can be verified on site. The ESRS Data Point List also raises data-granularity and governance requirements for supply chains and overseas operations. Companies’ ability to meet these requirements is becoming an important differentiator as they expand internationally.

7. UK plans GBP 400 million loan to Tropical Forest Forever Facility

On 3 September, the UK announced its intention to provide a GBP 400 million ($540.2 million) loan to the Brazil-led Tropical Forest Forever Facility (TFFF). The investment remains subject to final due diligence and agreement on the facility’s governance, structure and loan terms. Launched at COP30 in Belém, TFFF provides long-term performance payments to tropical forest countries that maintain forest cover through a market-based investment mechanism. It has secured approximately $6.7 billion in commitments from Norway, Germany, Brazil, Indonesia, France and the Minderoo Foundation, with the UK’s proposed loan providing additional support toward its initial $10 billion target.

TFFF is Brazil’s flagship international forest-conservation funding mechanism. It is intended to curb deforestation, protect biodiversity and support Indigenous communities, which are allocated 20% of payments. The UK’s participation shows that major economies are continuing to mobilise financing for the facility. However, the remaining funding gap and pace of commitments highlight the difference between climate-finance targets and the capital delivered, adding uncertainty ahead of year-end climate-finance negotiations.

8. ICBC lists $713 million dual-currency China-Arab green bonds

On 3 September, Industrial and Commercial Bank of China (ICBC) held a listing ceremony at Nasdaq Dubai for its dual-currency China-Arab Renewable Energy Cooperation green bonds. Chinese Ambassador to the UAE Zeng Jixin attended the event. Issued in US dollars and offshore renminbi, the bonds had a total issuance size of approximately $713 million. They were listed simultaneously in Dubai, Hong Kong and London under ICBC’s $20 billion Global Medium Term Note programme. Proceeds are earmarked exclusively for low-carbon renewable energy projects under China-Arab cooperation.

The transaction deepens Chinese financial institutions’ participation in Belt and Road green investment and financing, while tapping the offshore renminbi market in the Middle East. It also brings together China-Arab energy cooperation and green finance. The dual-currency structure and three listings tap Middle Eastern dollar liquidity while supporting the development of offshore renminbi green assets. Alongside JinkoSolar’s GSSA sustainability-linked loan, the transaction shows how Chinese institutions are expanding the use of green financing structures internationally. However, the two transactions alone are not enough to establish broader pricing influence in the global green bond market.

9. JinkoSolar signs sustainability-linked loan aligned with GSSA standards

On 31 August, JinkoSolar, one of China’s largest solar photovoltaic module manufacturers, announced that it had signed a sustainability-linked working-capital loan with Industrial Bank. The company reported cumulative module shipments of approximately 400 gigawatts across nearly 200 countries and regions as of the first quarter of 2026. It described the facility as the world’s first sustainability-linked loan to apply the supply-chain ESG standards of the Global Solar Storage Alliance (GSSA). The interest rate is linked to key performance indicators, incorporating China-developed industry-chain ESG standards into financial-product pricing.

The transaction links industry standards, verification and pricing within a single green finance product. It could provide a model for solar and storage exporters seeking access to preferential green financing. Industrial Bank’s green finance balance has reached RMB 2.67 trillion ($371 billion), which it said ranked first among Chinese joint-stock banks. Products linked to measurable ESG performance could help ease financing constraints for private enterprises while improving the inclusivity and verifiability of green finance. Their effectiveness will ultimately depend on the quality of the performance targets and verification.

10. Cambodia establishes Green Finance Working Group

On 14 August, Cambodian Prime Minister Hun Manet signed Administrative Decision No. 102, formally establishing the Green Finance Working Group, with the announcement made public on 20 August. The group is led by a representative of the National Bank of Cambodia, with a representative of the Ministry of Environment serving as deputy chair. Its members include relevant ministries and financial institutions. The group is responsible for coordinating the design of green finance policies, regulations and projects and mobilising capital to support environmental protection and the low-carbon transition. The National Bank of Cambodia previously released the country’s first 110-page Sustainable Finance Taxonomy in April 2026, developed with the International Finance Corporation and Climate Bonds Initiative. It also launched the $109 million Cambodia Climate Finance Facility with support from the Green Climate Fund.

The initiative is an important step in developing Cambodia’s green finance infrastructure. The taxonomy sets the standards, the working group provides the coordination mechanism and the Cambodia Climate Finance Facility mobilises capital, connecting standard-setting with implementation. As one of the world’s most climate-vulnerable countries, Cambodia needs to mobilise approximately $3.2 billion to meet its climate goals. Private-sector platforms such as the Green Finance Network, initiated by the Association of Banks in Cambodia and Global Green Growth Institute, are also progressing. Coordination between the central bank and environment ministry could help align standards and avoid fragmentation, providing a potential reference for other developing Southeast Asian economies pursuing a standards-led approach to green finance.