The global sustainable finance market is on course to approach USD 26.93 trillion by 2031, according to a 2026 report published by Mordor Intelligence. The research shows the market growing from USD 13.4 trillion in 2025 to USD 15.06 trillion in 2026, with a compound annual growth rate (CAGR) of 12.34% over the period.
The report says Europe continues to account for the largest share of sustainable capital worldwide. At the same time, Asia-Pacific is identified as the fastest-growing region, driven by expanding sovereign green bond programmes and a rise in regional initiatives aimed at digitalising sustainability data. The study notes that institutional investors in Asia-Pacific are responding to these developments, contributing to faster growth in ESG-aligned capital flows.
Environmental, social and governance (ESG) considerations are now described as firmly embedded in banking and investment decisions. This shift is being influenced by climate stress testing carried out by central banks and tighter disclosure requirements for companies and financial institutions. The report also points to product innovation as a factor shaping the market, including the development of digitally enabled green financial instruments and sustainability-linked financing, which have improved access and operational efficiency across the sector.
Despite the current momentum, Mordor Intelligence notes that sustained long-term growth will depend on stable regulatory frameworks, supportive interest-rate conditions and ongoing policy backing for ESG-aligned finance.
Regionally, the Asia-Pacific market is seeing rapid expansion. Governments and financial regulators across the region are introducing new financial tools and regulatory frameworks to support renewable energy projects and climate-related investment. Digitalisation of sustainability data is also cited as a key development, alongside growing investor appetite for green assets. These trends are placing Asia-Pacific as an increasingly important contributor to global sustainable finance growth.
Europe remains the leading region for sustainable finance, supported by established regulatory frameworks and policy initiatives. The report highlights green bond issuance by countries such as Germany and Italy as anchoring investor demand. It also points to the role of central bank policies in maintaining market liquidity. Major policy programmes, including the European Green Deal, continue to direct public and private capital towards long-term carbon neutrality goals, reinforcing Europe’s leading position in the market.
The report identifies several drivers behind the market’s expansion. Pressure from shareholders and wider stakeholders is shaping corporate decision-making, with company boards facing expectations from customers and employees who prioritise sustainability. In response, financial institutions are setting sustainability targets and applying stricter ESG criteria within lending arrangements. This, in turn, is influencing companies to raise environmental and social standards, directing more capital towards sustainable finance.
Regulatory changes around the world are also strengthening ESG practices through global reporting standards. Mandatory ESG disclosures are providing investors with more consistent and comparable information, reducing information gaps and making portfolio analysis more straightforward. Asset managers are using this data to assess risks and allocate capital, while regulators are embedding sustainability requirements into corporate reporting rules. The report concludes that ESG has moved from a voluntary practice to a core part of financial decision-making.
