Green bonds

The sustainable transition of the economy is one of the most important and urgent agendas. Financing the transition to a sustainable economy, and reaching the objectives set out in the Paris Agreement and the United Nations 2030 Agenda for Sustainable Development, calls for significant investments. To support this transition and the development of green capital markets dedicated to financing it, the Kingdom of Denmark decided to start issuing sovereign green bonds in 2022.

The green bonds are issued in accordance with the Kingdom of Denmark's Green Bond Framework, which describes the principles of the green bond, including the criteria governing which expenditures are eligible to be financed by the green bond proceeds. Eligible green expenditures under the framework are evaluated and selected on the basis of the definitions and criteria in the EU classification system for sustainable economic activities (the 'EU Taxonomy') as adopted by the Commission on June 4th 2021 in the first Delegated Act for climate change mitigation and climate change adaptation activities. This reflects the ambition to follow the highest standard for green bonds and contribute to enhancing transparency in the green bond market. It is assessed that the eligible green expenditures under the Kingdom of Denmark's Green Bond Framework are:

  1. Aligned with the technical screening criteria of the EU Taxonomy for when an economic activity contributes to the objective of climate change mitigation.

  2. Aligned with most of the so-called 'do no significant harm' criteria, which dictate that the economic activity cannot harm any of the other environmental objectives of the EU Taxonomy.

In line with best market practice, an assessment of the Kingdom of Denmark's Green Bond Framework has been obtained from an independent reviewer. The independent assessment (Second Party Opinion) was conducted by Cicero, rating the Kingdom of Denmark's Green Bond Framework 'Dark Green' – the highest possible environmental grade. The Kingdom of Denmark's Green Bond Framework is further aligned with the Green Bond Principles (2021) from the International Capital Market Association (ICMA) and has sought to align with the proposed regulation on a European Green Bond Standard (EU GBS) from July 6th 2021.

An amount equivalent to the proceeds from the issuance of green bonds will be allocated to green expenditures and investments undertaken by the central government. The eligible green expenditures included under the Kingdom of Denmark's Green Bond Framework support:

  1. The production of renewable energy, including wind and solar energy.
  2. The green transition of the Danish transport sector.

Amounts for the eligible green expenditures are stated in the document Eligible green expenditures, which can be found on this page. The list of eligible green expenditures is updated annually following the confirmation of the Budget Act for the following year, and once the realised amounts are known in connection with the publication of the central government accounts.

The central government will report on the allocation of proceeds from the sale of green bonds, and on the expected environmental impact annually.

Green bonds are issued as twin bonds

The green bonds are issued as twin bonds in line with the twin bond concept introduced by Germany in 2020. This implies that green bonds are issued with the same financial characteristics as one of the central government's existing conventional on-the-run issues, i.e. the same maturity, interest payment dates and coupon rate.

The twin bond concept supports the liquidity in the green bond, as investors, at any time, will have the opportunity to switch the 10-year green twin bond to the corresponding and more liquid conventional 10-year twin bond one-to-one. However, investors will not be able to switch the conventional twin bond to the corresponding green twin bond.

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