Denmark issues its first sovereign green bond

The Kingdom of Denmark has announced its intention to raise up to DKK 10 billion (USD$1.6 billion) through a new green bond offering. This initiative is anticipated to be the first sovereign issuance under the newly adopted European Green Bond (EuGB) standard.

The EuGB regulation, adopted by the EU in November 2023 and set to take effect in December 2024, was launched by the European Commission to establish a “gold standard” for green bonds. The regulation aims to combat greenwashing and promote the sustainable finance market within the EU. Under these rules, all proceeds from instruments issued under the EuGB designation must be invested in economic activities aligned with the EU Taxonomy. However, the regulation includes a flexibility provision allowing 15% of the funds to be directed towards activities compliant with the taxonomy requirements but in sectors without established criteria. Issuers must clearly explain the allocation of these funds.

Issuers of EuGB bonds are also required to adhere to stringent transparency criteria. This includes disclosing the use of the bond proceeds and committing to a green transition plan, along with reporting on how the investments contribute to these plans.

Denmark’s planned green bond issuance follows an announcement from the central government as part of its borrowing strategy for 2025, indicating an update to its green bond programme. The objective is to support the development of the green bond market. The new 10-year bond will be introduced in the second half of 2025, initially through syndication. Subsequently, it will be included in the central government’s list of on-the-run bonds and offered regularly via auctions throughout the remainder of 2025, with a maximum raise of DKK 10 billion.

Proceeds from the green bond issuance will be allocated to green central government expenditures, such as energy sector transformation, sustainable transport, agricultural land conversion, and nature restoration.

Signe Krogstrup, Governor of Danmarks Nationalbank, stated, “With the upcoming issuance, the Danish state actively supports a common European language for green investments. The European Green Bond Standard creates transparency and trust in the market – and the Danish state is leading the way by adhering to the highest standards, thereby supporting the development of green capital markets.”