By Nikolaj Skydsgaard

COPENHAGEN, Reuters – Denmark’s central bank announced Wednesday that it will soon issue the first green bond to finance its move towards carbon neutrality.

Denmark has been rated triple A and is at the forefront in developing wind power. The country has begun to look at funding its green transition which involves reducing greenhouse gas emission by 70% between 1990 and 2030.

According to Denmark’s central banking, the 10-year-old green bond with a coupon rate of 0.00% will be issued January 19, 2022. It will have a maturity date of November 15, 2031. This is subject to stable market conditions.

Signe Krogstrup, deputy governor of the central bank, stated in a statement that “with a green bond,” the Danish government provides a product in high demand by investors that could support broad and diverse investor bases.

This debt is being earmarked to green investments. It would be aligned closely with the European Union’s Sustainable Finance Taxonomy. A list of economic activities that must satisfy certain criteria to qualify as sustainable investments.

That is what investors want. Arne Rasmussen, chief analyst at Danske Bank, stated that investors want green investments within taxonomy.

An exact number of this so-called “twin bond”, which is issued in the same manner as the conventional 10-year benchmark, will be revealed later in December.

The finance ministry of Denmark said that it will cover the government’s expenses in 2022 at 10-12 billion Danish crowns (1.52 billion to $1.82 billion).

Rasmussen explained that while it’s not a large amount of money, it was still significant enough to interest investors.

“There are a few government bonds that have a triple A rating, but I’m confident they will be popular.”

PFA Denmark, Denmark’s biggest commercial pension fund manages over 600 billion Danish crowns. It called Denmark’s decision “attractive.” Christian Schubart (PFA’s head for sustainable investments), said to Reuters that it was an “investment opportunity” that he wanted to seize.

Germany’s twin bond idea, also introduced last year in Germany, allows investors to switch between the conventional and green bonds at any given time. However, they cannot do vice versa.

($1 = 6.5890 Danish crowns)