10-year instrument aligns fully with EU Taxonomy as Copenhagen raises bar for sovereign sustainable finance
In Copenhagen, the Danish government is preparing to test global markets with a precedent-setting deal: the world’s first sovereign green bond issued under the European Green Bond Standard (EuGBS). The 10-year instrument, expected in the second half of 2025 via syndication, will make Denmark the first country to embed the EU’s strict new green bond rules directly into its sovereign borrowing program.
The bond will raise up to DKK 10 billion (€1.3 billion) this year, with proceeds directed toward green government spending across energy transformation, sustainable transport, agricultural land conversion, and nature restoration.
A higher bar for green finance
Denmark’s updated framework, known as the European Green Bond Factsheet, has been externally reviewed by Sustainable Fitch. It confirms full compliance with both the EU Taxonomy regulation and ICMA’s widely used Green Bond Principles.
“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,” said Signe Krogstrup, Governor of Danmarks Nationalbank.
Unlike earlier green frameworks, the EU Standard is legally binding and requires all proceeds to be linked to activities deemed fully sustainable under the taxonomy — from offshore wind subsidies to railway electrification and carbon-sequestering wetland projects.
Market structure and liquidity
The new green bond will be issued as a twin to Denmark’s existing conventional 10-year bond (DGB 2.25% 2035), sharing the same maturity date and coupon but traded separately. This “twin bond” structure — already used in Denmark’s prior green bond program — is designed to ensure liquidity and flexibility for investors, reducing the common liquidity premium that has deterred some large institutions from entering the green bond market.
BNP Paribas, Nordea, and SEB advised Danish authorities in updating the framework, with SEB highlighting the broader significance.
“Denmark’s approach underlines how sovereign issuers can demonstrate leadership in mobilising capital for a sustainable future,” said Lars Eibeholm, Global Head of Sustainable Debt Capital Markets at SEB.
Why this matters for policymakers
The European Green Bond Standard, introduced in late 2023, was designed to tackle longstanding concerns about “greenwashing” by setting a uniform rulebook for issuers. Unlike ICMA’s voluntary principles, the EuGBS is binding for those who adopt it, demanding high levels of disclosure and external review.
Denmark’s decision to be the first sovereign mover carries three key implications:
- Benchmarking: By pioneering the EuGBS at sovereign level, Denmark provides a reference point for other EU member states preparing to align debt programs with the regulation.
- Investor confidence: The combination of taxonomy alignment and external verification is expected to attract institutional investors under pressure to show compliance with EU sustainability rules.
- Policy signalling: For Brussels, Copenhagen’s move demonstrates that the standard can work in practice, strengthening the EU’s case for exporting its taxonomy and disclosure regime globally.
The global lens
Sovereign green bonds have grown rapidly since Poland’s inaugural issue in 2016, but until now frameworks varied widely. Denmark’s EuGBS-compliant bond will be the first to apply a fully harmonized EU framework, creating what many see as a template for future sovereign deals across the bloc.
For developing nations, the move matters as well. If the EuGBS gains traction, multilateral lenders may increasingly channel concessional capital through taxonomy-aligned bonds, raising the bar for market access.
The Danish government has confirmed it will continue to issue under the EuGBS framework “as long as no substantial changes are made to its content,” with regular allocation and impact reports to follow.
Key Takeaways
For finance ministers, central banks, and multilateral institutions, Denmark’s upcoming issuance is a test case. It will show whether sovereign borrowers can meet the EU’s strict sustainability requirements without sacrificing market depth. If successful, the bond could accelerate the shift toward a single global language for sustainable finance, closing loopholes that have allowed inconsistent definitions of “green.”
In a market where demand for credible green assets already outstrips supply, Denmark is positioning itself not just as an early adopter but as a standard-setter. The question now is whether others will follow.
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