The Twin bond concept
The issuance of green bonds has been on the rise in global debt markets for several years. A trend that is spreading to sovereign issuers around the world including Danmarks Nationalbank.
“One of the advantages of issuing a green bond is the increased demand from investors resulting in better borrowing conditions for the issuer compared to a conventional bond,” Gustav Landström, Global Head of SSA Origination at Danske Bank, explains. He elaborates
“In this case, the green bond will be issued together with a conventional governmental bond. This is called a Twin Bond structure which will make it possible to issue green bonds without compromising the liquidity in conventional Danish government bonds,”.
The Danish Twin bond is line with the twin bond concept introduced by Germany in 2020 and investors will have the opportunity to switch the 10-year green twin bond to the corresponding and more liquid conventional 10-year twin bond one-to-one. However, investors will not be able to switch the conventional twin bond to the corresponding green twin bond.
The expected issuance volume will be announced in connection with the announcement of the central government's borrowing strategy in December.
What is a green bond?Green bonds are bonds that exclusively finance projects providing a clear environmental benefit.
The eligible green categories are defined in the issuers Green Bond Framework and the projects can for instance include renewable energy, pollution prevention and energy efficiency.