Denmark Sets to Launch Inaugural Sovereign Green Bond under EUGB's "Gold Standard"

The Kingdom of Denmark is set to make history by issuing a new green bond worth up to 10 billion DKK (USD$1.6 billion) in the second half of 2025. This will be the first-ever sovereign issuance under the new European Green Bond (EuGB) standard, marking a significant step forward in the development of green capital markets.

The planned issuance follows an announcement made as part of the central government's borrowing strategy for 2025, where it was revealed that its green bond programme would be updated. The new green bond will be a 10-year European Green Bond, fully aligned with the EU Taxonomy and sustainable finance principles.

Companies issuing bonds under the EuGB designation are required to follow strict transparency criteria. This includes disclosing how the proceeds from the bonds will be used and committing to a green transition plan. All proceeds from instruments issued under the new EuGB designation must be invested in economic activities that are aligned with the EU Taxonomy.

The EuGB regulation, launched by the European Commission in November 2023, establishes a "gold standard" for green bonds. Its aim is to combat greenwashing and advance the sustainable finance market in the EU. The regulation includes a flexibility pocket enabling 15% to be invested in economic activities that comply with taxonomy requirements, but in sectors that don't yet have established taxonomy criteria.

The new green bond offering is expected to be opened via syndication. After the initial issuance, the green bond will become part of the central government's list of on-the-run bonds. After the issuance, the bond will be offered regularly through auctions during the remainder of 2025.

Signe Krogstrup, Governor of Danmarks Nationalbank, stated that the Danish state supports a common European language for green investments. She also mentioned that the European Green Bond Standard creates transparency and trust in the market. By adhering to the highest standards, Denmark is leading the way in supporting the development of green capital markets.

Examples of the green central government expenditures that the proceeds from the bond issuance will be directed towards include the transformation of the energy sector, sustainable transport, conversion of agricultural land, and nature restoration. Proceeds from the green bond issuance will be directed towards green central government expenditures only.

With this move, Denmark is demonstrating its commitment to sustainable finance and setting an example for other countries to follow. The EuGB regulation, with its stringent criteria and focus on transparency, is expected to play a crucial role in the growth of the green bond market in the EU.

Denmark Sets to Launch Inaugural Sovereign Green Bond under EUGB's "Gold Standard"