European banks underutilize green bonds for energy transition

A study by the Institute for Energy Economics and Financial Analysis (IEEFA) reveals that green bonds represent less than 1% of assets on average for Europe’s 47 largest banks. Despite most institutions having established frameworks for green bond issuance, the scale remains insufficient to significantly alter asset allocation.

According to IEEFA analyst Kevin Leung, growth is hindered by continued lending to high-emitting assets and a limited pipeline of green projects. The report highlights a mismatch in how funds are allocated: renewable energy projects receive approximately 20% of green bond proceeds but account for 90% of reported avoided emissions. Conversely, green buildings receive about 70% of funds but contribute only 3% to avoided emissions.

Leung suggests that for green bond programs to be more credible, they must better align financing with assets essential for the energy transition and industrial resilience while maintaining low climate risk exposure.