The Kingdom of Denmark announced plans to raise up to DKK 10 billion (USD$1.6 billion) through a new green bond offering, expected to be the first ever sovereign issuance under the new European Green Bond (EuGB) standard.

Adopted by the EU in November 2023, and taking effect in December 2024, the EuGB regulation was launched by the European Commission to establish a “gold standard” for green bonds, in order to combat greenwashing and advance the sustainable finance market in the EU.

Under the regulation, all proceeds from instruments issued under the new EuGB designation are required to be invested in economic activities that are aligned with the EU Taxonomy, although the rules include a flexibility pocket enabling 15% to be invested in economic activities that comply with the taxonomy requirements, but in sectors that don’t yet have established taxonomy criteria, with issuers clearly explaining where these funds will be allocated.

In addition to the investment rules, companies issuing bonds under the EuGB designation are required to follow strict transparency criteria, including disclosing how the proceeds from the bonds will be used, as well as committing to a green transition plan, and reporting on how the investments contribute to the those plans.

According to Denmark, the planned issuance of the new green bond follows an announcement made as part of the central government’s borrowing strategy for 2025 that its green bond programme would be updated, with the aim of supporting the development of the green bond market.

The new 10-year bond will be opened in the second half of 2025, with the first issuance to take place via syndication, after which it will become part of the central government’s list of on-the-run bonds, and offered regularly through auctions during the remainder of 2025, raising maximum proceeds of DKK 10 billion.

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

Signe Krogstrup, Governor of Danmarks Nationalbank, said:

“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.”