November 13, 2019 / 3:15 PM / 25 days ago

Denmark weighs issuing green sovereign bonds

COPENHAGEN (Reuters) - Denmark’s central bank is looking at ways to issue new debt earmarked for green investments, known as green bonds, it said on Wednesday, as the government looks to fund an ambitious goal of reducing carbon emissions by 70% by 2030.

“As of this moment, a decision has yet to be made on green bonds, but the central bank has assessed different options for a partial coverage of government financing needs through green bonds,” the central bank said in a statement on Wednesday.

Danish Prime Minister Mette Frederiksen said in a parliamentary debate on Tuesday she was “receptive” to the idea of issuing green bonds to finance green investments.

“I am also looking for financing. We will not be able to do everything we want to do with regards to the `green’, if we do things as we normally would,” Frederiksen said.

The issuance of green bonds, a fixed-income security that raise capital for environmentally friendly projects, has surpassed $200 billion globally so far this year and could rise to $400 billion next year, according to the Climate Bonds Initiative.

“The Netherlands did it - is it a way forward? I am definitely not rejecting it,” Frederiksen said.

In May, the Netherlands became the first triple-A rated nation to issue green bonds, raising almost 6 billion euros after getting more than three times that amount in bids.

But Denmark, which has the same rating and is one of the European Union’s least indebted nations, could face a lack of liquidity in the sovereign bond market if it decides to issue separate green bonds, according to Danske Bank’s chief economist Las Olsen.

“There is a large demand for Danish government bonds already, and the same will apply for these,” Olsen said. The price and interest rate on Danish green government bonds would probably mirror existing government bonds, he said.

The central bank said it had looked at issuance models, which “support a continued liquid and well-functioning Danish government debt market.”

Denmark’s biggest pension fund, PFA, currently has green bonds worth around 2 billion Danish crowns ($295.01 million), including Dutch and Japanese.

“But that is not an expression of our interest, but more of the availability of these bonds,” Christian Lindstrom Lage, chief executive of PFA Asset Management, told Reuters and added he viewed “very positively” the prospect of Danish green government bonds.

“But in order for something to really happen here, we also need more investment cases.”

Reporting by Nikolaj Skydsgaard, editingn by Larry King

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