Denmark Sets Foot in Green Bond Market with More than $500 Million Initial Issue

Published on: 20 January 2022 10:44 PM
by KnowESG
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A Brief Summary

Denmark's central bank, Danmarks Nationalbank, stated that it has completed its first green bond offering, generating more than $500 million to finance the government's expenditures and investments in renewable energy and green transportation.

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According to the central bank, demand for the 10-year bond was extremely robust. The bond's demand appears to have been driven by the bond's sustainability-related elements since the bond received a much better price than equivalent conventional offerings.

Denmark issued the bond as part of a "twin bond" sale, combining it with the issuing of another 10-year bond with the same maturity, interest payment dates, and coupon rate. The bond was priced at a 5 basis point premium to its 10-year conventional twin, with an effective yield of 0.14 per cent.

The bond was issued under Denmark's Green Bond Framework, which specifies where revenues from green bond issues might be invested. Targeted areas of investment within the framework include the generation of renewable energy, such as wind and solar energy, as well as assistance for the Danish transportation sector's green transformation.

The sale is expected to be the first in a series for Denmark, as the central bank has stated that it aims to issue more than $500 million in green bonds in 2022. The proposal comes after Danish Prime Minister Mette Frederiksen announced a series of climate efforts for the country earlier this year, including promises to speed up green domestic aviation and tax carbon generating firms. Denmark's current climate goals include reducing emissions by 70% by 2030 and reaching climate neutrality by 2050.