Why Data Centers May Help Drive ESG-Labeled Bond Issuance

Bond issuance linked to environmental, social and governance (ESG) purposes dipped in the first half of 2025 following a strong second half in 2024. But we expect issuance of ESG-labeled bonds will pick up for several reasons.

Many debut issuers are still coming to the market (Display, left). Borrowers from Austria, Sweden and Spain have significantly increased their ESG-labeled bond issuance, providing over 5% of global total issuance year to date. Their contributions underscore the adaptability and resilience of the ESG-labeled bond market, as many issuers continue to prioritize responsible investing.

In terms of sectors, new ESG-labeled issuance by utilities comprises a substantial part of the market, averaging around 9% of annual issuance from 2018 through 2024. We expect that growing demand for energy from data centers (Display, right) will result in higher capex by utilities and a further increase in their ESG-labeled bond issuance. Why?

First, the rollout of data centers will likely widen to include a range of industries, not just tech companies. Second, financing is likely to diversify too, with public-market debt increasingly supplementing private-market debt. Third, data centers need energy supplies that are reliable: this means not only increased power generation but also more capex to upgrade ageing electricity grids. Finally, to minimize environmental impact, utilities will need to ensure diversity of energy supplies by harnessing more renewables alongside natural gas, which we think will lend itself naturally to more ESG-labeled issuance.