An aqueous phenolic resin dispersion that includes an aqueous continuous phase and, dispersed within the aqueous phase, the reaction product of a phenolic resin precursor and a modifying agent wherein the modifying agent includes at least one ionic group and at least one functional moiety that enables the modifying agent to undergo condensation with the phenolic resin precursor. The resulting dispersed phenolic resin reaction product includes at least one phenolic ring to which is bound the ionic group from the modifying agent. The pendant ionic group is a sulfate, sulfonate, sulfinate, sulfenate or oxysulfonate and the reaction-enabling moiety preferably is a hydroxy or hydroxyalkyl.