The market for so-called "green bonds" continues to grow, and is becoming more geographically diverse, according to a report published Thursday by Fitch Ratings.

Green bond activity around the world continues to rapidly increase, with issuance rising by 60% in 2016 to US$113 billion, according to Fitch. Green bonds are typically issued to finance environmental projects.

"This underlines investor and issuer interest in the asset class and environmental, social and governance (ESG) risk," Fitch says in a news release.

In particular, the report indicates that European fixed-income managers, who hold an estimated €5.8 trillion of fixed-income assets, are increasingly sensitive to ESG risk.

"Over half of European investors we surveyed expect a financial impact from ESG risk on their investments, with 33% expecting it to increase further and spread across sectors, and 20% seeing it more concentrated in a few sectors," says Monica Insoll, Fitch's head of credit market research, in a statement.

Fitch also notes that new issue activity in China and India is helping diversify the market.

"These bonds are often in hard currency in order to attract established investors with the proceeds then swapped into local currency. However, in a sign of increasing market maturity, some local-currency deals are also starting to take off," says Insoll.