This momentum continued into 2022. This was the Australian dollar corporate GSSS market’s best year by proportion of deal flow, as 36 per cent of domestic corporate issuance printed in sustainability-linked or use-of-proceeds (UOP) format despite an overall dismal year for the corporate market in Australia.

The market has not stalled since then but it has struggled to attract an ongoing flow of new local entrants. GSSS deals represented 15 per cent of the domestic corporate market in 2023 and just 7 per cent of corporate flow last year. The proportion is higher so far in 2025, at 19 per cent, but this is skewed by the return of NBN Co with a A$750 million green-bond print in February.

Volume has been propped up by corporate Kangaroo issuance. Mercury New Zealand issued its second Kangaroo – its first since 2021 – in green format in mid-March, while European issuers Iberdrola Finanzas and EnBW International Finance also chose green bonds for their 2024 Kangaroo debuts.

The problem is certainly not the state of the Australian dollar corporate bond market as a whole. With nearly A$30 billion of new issuance, 2024 marked a record year for local corporate supply, including transaction flow from new and returning issuers, and even some that have used GSSS format for deals on previous occasions but chose not to this time.

Domestic issuers that opted for green-bond debuts in recent months say doing so supported positive deal outcomes. But these issuers tend to be exceptions. NBN has a very large ongoing funding task and is thus incentivised to seek out all available liquidity pools (see box). Mirvac is in the favoured property sector and still views green bonds more as a product of its sustainability progress than a tool (see box).

The issue seems to be that decisions have been made by Australian corporate borrowers, and those that have elected not to offer GSSS bonds are not being won over. Since August 2023, 52 local corporate issuers have tapped the Australian corporate market – just four of them in GSSS format.

Some of the group of corporate borrowers that have issued in this period are likely unsuitable for UOP issuance in the more rigorous environment that now surrounds such names. But KangaNews has identified 10-20 names at least that might have been able to consider labelled issuance but elected to proceed with vanilla deals.

In a few cases, issuers have even backed away from GSSS issuance after debuting. Woolworths issued a green bond in 2019 – which matured in April 2024 – and a sustainability-linked bond (SLB) in 2021. But the nearly A$1.5 billion of domestic issuance it completed in 2023 and 2024 all came in unlabelled format.

Worley Financial Services’ transaction in April 2023 was the last public SLB in Australian dollars. Perhaps not coincidentally, Worley is another borrower to drop GSSS labels from its funding. The deal Worley started taking indications of interest for on 27 March before later postponing was to be offered in unlabelled format.

Meanwhile, Ampol issued a self-labelled sustainability-linked hybrid in 2022 and followed with a vanilla hybrid in December 2024. Australian Catholic University issued one of Australia’s first corporate green bonds, in 2017, but chose vanilla format for its A$50 million 20-year deal in November 2020 – though its status as a sub-benchmark-sized transaction may have influenced the decision. Other issuers to drop labels include SGSP Australia Assets – trading as Jemena – which issued a green bond in 2021 but opted for vanilla in 2022 and 2024, and Vicinity Centres, which issued a green bond in 2022 but vanilla in 2024 and 2025.

In Jemena’s case, KangaNews understands the issuer has eligible assets and is considering a follow up green bond or a green loan later this year. Without commenting on specific names, intermediary sources suggest early issuer enthusiasm for entering the green-bond market has waned, with the result that there is less willingness to identify and measure assets for labelled issuance if doing so is not relatively straightforward. Meanwhile, the SLB asset class’s loss of momentum across global markets has rendered it more or less a nonstarter for Australian borrowers.

Market users say the reason more treasurers are not opting for GSSS structures comes down to a straightforward cost-benefit analysis. Bringing a labelled bond to market involves significant preparatory work, especially for new issuers.

The labelled bond market has also run into a number of headwinds over recent years, among them regulatory uncertainty, politically induced environmental, social and governance (ESG) backlash, and resourcing constraints. All of these have created further disincentives to apply labels to bonds for all but the greenest issuers.

Some market participants suggest the regulatory and now challenging offshore political environment for ESG has made treasurers reluctant to consider putting their heads above the parapet with labelled issuance. Others point to the looming mandatory reporting regime as a resourcing drag on corporate treasury teams.

One DCM banker tells KangaNews: “There has been a pullback in interest from corporates when it comes to green bonds and the queries about doing labelled deals have paused. Those that have put the time in the last few years are the labelled issuers we are already seeing. Headlines like banks leaving the Net Zero Banking Alliance don’t help.”

All these issues might be worth borrowers’ while to deal with if GSSS bonds provided either or both of a clear pricing incentive or access to needed liquidity. On the latter, bankers say limited commitments to labelled issuance need to be considered in the context of a very constructive corporate market.

Last year, Australian dollar corporate issuance reached almost A$28 billion – well past the previous record of A$20.5 billion in 2017 – and deals were commonly oversubscribed. Added to constructive global markets and a supportive bank sector, issuers have plenty of liquidity to call upon without jumping through the GSSS hoops. There is no sign that ESG credentials will be a fundamental difference maker even in a newly challenging market environment.

Perhaps the central issue, intermediaries say, is that corporate issuers do not think they are getting a financial reward for their commitment to GSSS bonds. “Yes, green issuance has some evidence of a greenium and price stickiness, but it’s not enough of a value-add versus the risk for some borrowers,” the banker says.

Given these realities, it also appears that intermedaries are no longer pushing their clients toward GSSS transactions with the same vigour as was the case a few years ago. The same DCM banker insists that labelled bonds have “not been ruled out entirely” but the focus now is on doing them only for “the right names”.

The banker adds: “SLBs have completely fallen away as an issuance option. We still suggest green bonds, but bringing one to market needs to make sense. The greenest sectors – property and utilities – work. In other sectors it is not a definite no but if there is any risk that the greenness of the issuer could be called into question, we are likely to recommend against it and suggest a green loan instead.”