Facilitating green bonds is becoming a business opportunity for large banks

When Eoliennes, a wind farm operator issued a €1.5bn green bond, a syndicate of banks including Credit Agricole, BNP Paribas, and SMBC put the deal together. In such instances, banks demand a fee for their market making efforts. The ‘wallet’, as it is referred to in industry parlance.

New research from the Anthropocene Fixed Income Institute (AFII) shows that for the first time in two years, the green wallet for large banks has exceeded fees earned from fossil fuel deals.

This is set against a backdrop of mounting evidence of fossil fuel lending by large banks and several high-profile exits from the Net Zero Banking Alliance. Why then, despite the context, are large banks facilitating green bond issuance?

Green bond business

The simple answer is that it is good business. Take for instance, HSBC which withdrew from the NZBA in July this year. AFII’s research, which draws on data from Bloomberg, shows that in Q3 2025, the bank’s fossil fuel fees were down 18%, despite total fees exceeding $1bn. Importantly, the bank earned more from its green wallet than fossil fuel deals.

AFII’s research suggests that this true for the wider industry, on average. The total green wallet has exceeded that for fossil fuel deals for the first time in two years.

“This is significant as it presents a positive case for investing in sustainable business, which is perhaps counter to the narrative about banks pulling back from sustainable activity (e.g. leaving the NZBA)”, Josephine Richardson, AFII’s head of research, told Net Zero Investor.

Market winds

The business of facilitating green bond issuance has a lot to do with a widening corporate appetite for such instruments.

Navin Rauniar, a former banker who now advises companies as a non-executive independent director says green bonds are becoming increasingly popular amongst CFOs, particularly in hard-to-abate sectors.

“Take for instance, a steel company that wants to pivot to green steel. The CFO would want to know what the available financing options are”, says Rauniar.

“The CFO also wants to know – ‘how do I use this to assist with decarbonisation and how will this (decarbonisation) reflect as increased intangible value on my balance sheet’”, he adds.

“The greenium or the discount, that is the elephant in the room”, Rauniar told Net Zero Investor.

Market demand for green bonds could partly explain AFII’s findings, combined with headwinds in the fossil fuel industry. “I would infer the reduction in fees from fossil deals is related to the ongoing challenges in the oil and gas sector, with news reports of job cuts and reduced M&A activity”, says Richardson.

Market reward

Given that most banks tend to be listed on stock markets, the market’s reaction to a bank’s green wallet is seemingly relevant. There are early signs, according to AFII, that bank’s stock performance is correlated with its green wallet.

Correlation is of course, not causation but it sends an important message. “The market always rewards leaders and punishes the laggards”, says Richardson.

“[AFII’s blog] suggest a possible causation that the market recognises that a commitment to sustainable business may be related to a more reliable future fee stream for those banks”, she adds.

Alignment

While these activities are not on the balance sheet, those that are suggest a vastly a different picture. BNEF evidence shows that for every dollar of banks’ fossil fuel financing, 89 cents were invested in low-carbon technologies.

“Most big energy financing banks have failed to improve their financing mix. They remain deeply entrenched in continuing to overfinance fossil fuels and under-finance low carbon energy supply”, says Richard Brooks, climate finance program director at Stand.Earth, a non-profit.

When it comes to bond facilitation, it might be the case that a bank’s reputation precedes it. In theory, if markets respond positively to green wallets – a facilitation market built on long-term client relationships – it might also reward a bank’s green lending reputation. It is however, too early to tell if that is the case.

For now, two realities coexist in the banking industry. One on the balance sheet and one off it. Will the market reward alignment? Only time will tell.