Green bonds

Abstract icon On 19 January 2022, the Kingdom of Denmark opened - via auction - its first green bond with a coupon rate of 0.00 per cent and maturity on 15 November 2031. In 2023, a new 10-year green bond will be opened - via syndication - with maturity on 15 November 2033. The expected green bond issuance volume is up to kr. 10 billion in 2022. The issuance volume of green bonds is determined on the basis of the amount of eligible green expenditures, which constitutes an upper ceiling, while taking the overall borrowing strategy into account.
Green Bond Framework 
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 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. 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 4 June 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, which has rated the Kingdom of Denmark's Green Bond Framework Dark Green – the highest possible environmental grade.

The Kingdom of Denmark's Green Bond Framework is 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) on 6 July 2021, including the reporting and external verification requirements. 

The eligible green expenditures included under the Kingdom of Denmark's Green Bond Framework supports:

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

Green bond use of proceed (click to enlarge)

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 climate and environmental impact.

Green 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 will be issued with the same financial characteristics as one of the central government's existing conventional on-the-run issues. Accordingly, the new 10-year green bond will have the same maturity, interest payment dates and coupon rate as the central government's 10-year benchmark bond, 2.25 per cent 2033 (ISIN: DK0009924532).

Green twin bonds (click to enlarge)

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.

Trading and liquidity in the new green bond are further supported by existing initiatives established for the conventional government securities. This includes the central government's securities lending facility, which will apply to the green bond in line with other government securities. Danmarks Nationalbank will at all times ensure that the total outstanding amount of green bonds, including securities lending, does not exceed the amount of eligible green expenditures.

The Green Bond Framework, Second Party Opinion and other documents related to the Kingdom of Denmark's green bond programme can be found on this page.