SPEECH
Governor Signe Krogstrup's speech at Nordea's
11th Annual Nordic AAA Seminar about financing
and the energy transition
11 May 2023
CHECK AGAINST DELIVERY
Slide 1
Many thanks to Nordea for inviting me today.
You might question the relevance of discussing climate change and fi-
nancing the transition amid inflationary pressures and banking turmoil.
I would argue that these phenomena are intimately connected.
Climate change and the needed energy transition have contributed to the
supply-driven energy price volatility, which has been a primary driver of
the current high levels of inflation in Europe.
• Climate considerations were a key factor underlying the growing de-
pendence on Russian natural gas in Europe prior to the invasion of
Ukraine.
• A higher proportion of renewables in the energy mix in Europe means
that the energy supply, and hence energy prices, have become in-
creasingly sensitive to heat, drought and lack of wind, as we experi-
enced last summer.
• While we have no counterfactual, it is likely that the European energy
mix, and thus inflation and interest rates, would have developed very
differently in the absence of global warming.
Slide 2
This is the agenda for the presentation.
First, I will give a status on climate change, with a focus on financing
needs.
Then, I will discuss the role of the financial sector in supporting the green
transition and managing climate-related risks. The financial sector as a
whole - including Danmarks Nationalbank - still has much work to do to
understand climate-related risks.
Finally, I will turn to Danmarks Nationalbank's role and efforts in the
green transition.
Slide 3
We start with a status on the climate.
Slide 4
Global energy systems are still largely based on fossil fuels.
• The use of oil and gas continues to grow, while the use of coal has
stagnated.
• Missing de-carbonisation of energy, notably, mirrors insufficient cli-
mate policies to support pricing of carbon emissions.
We are far from reaching the climate goals of the Paris Agreement.
• As a result of the sustained growth in carbon emissions, temperatures
continue to rise.
• The recent 6th IPCC Synthesis Report - published in March - concludes
that even with the current nationally determined contributions, it will
be hard to limit global warming to below 2 °C.
• With the current nationally determined contributions, global tempera-
tures are likely to increase by 2.8 °C by 2100.
Challenges to an electrification of the European energy supply remain.
• Solar and wind generation challenges the stability of supply. Fuel-
based power plants provide a more stable supply of electricity than
solar and wind energy, which are sensitive to the weather.
• Plans to ensure the stability of supply of renewable energy rely on un-
tested technologies, e.g. Power-to-X or e-fuels. Because these solu-
tions are under development, they have yet to be tested at a large-
scale, and some technology risk remains.
• Electrification requires access to necessary minerals and rare earths.
Global demand for critical minerals is set to rise two- to four-fold by
2030, according to the IEA. A key challenge is that geopolitical risk
and security concerns increasingly call for diversification of supply
chains. This is, however, hampered by the fact that critical minerals
extraction is geographically highly concentrated.
• The increasing importance of critical minerals could become a bottle-
neck for green energy deployment.
Slide 5
Demand for energy can shift rapidly when incentives are sufficiently
strong.
• Europe has rapidly reduced its dependence on Russian gas during
2022.
• Consumption of energy has been reduced all together, and consump-
tion has switched to alternative energy sources.
• At the end of 2022 and early 2023, European consumption of gas was
around 20 per cent below the average for the corresponding months
in 2021 and 2022.
• At the same time, Europe has increased its import of liquified natural
gas from Africa and the Middle East.
In order to take the energy transition further - and make it greener - poli-
cies that shift incentives and promote stability will help support financing.
Thus, access to finance to enable green investment can be supported by:
• Policies to make green solutions profitable, e.g. carbon taxation.
• Stable planning horizons, which allow these companies to think long-
term.
Lower growth is not the solution to reaching the climate goals.
• 'Degrowth' is sometimes advocated as a solution to climate change.
• Recent developments underline how we cannot rely on lower growth
for reducing emissions. In 2020, fossil fuels consumption fell by only
5.4 per cent, despite a substantial drop in global economic activity,
related to the covid-19 pandemic.
• Growth would have to fall to an unrealistic degree to make a mean-
ingful dent in emissions.
• Instead, policy action can shift incentives in favour of renewable ener-
gies and away from fossil fuels, such as carbon taxes and emission
standards, in additional to technical solutions.
Different estimates of the need for financing are illustrated in the box to
the left.
• The right-hand box contains different estimates for the world, EU and
Denmark.
• The estimates are based on net-zero scenarios for the world, Fit for 55
scenarios for the EU and the 70 per cent goal of the Climate Act for
Denmark.
• These figures are associated with many uncertainties, and I do not
want to focus on any specific figure.
• The point is: Vast amounts of funding are necessary for the global
economy to transition.
Slide 6
The final point on sustainable finance brings me the next topic: the role of
the financial sector in the green transition. First, two important points:
• We cannot and should not expect the financial sector - and here I in-
clude the central banks - to solve the climate problem. The tools to
shift behaviour, demand and supply away from fossil fuel-based en-
ergy are fiscal and regulatory.
• However, the financial sector can support the transition by perform-
ing its role of intermediating capital and managing the associated
risks.
• I will elaborate on this role in the next slides.
Slide 7
Climate change and the transition bring both opportunities and risks to
the financial sector.
• Any economic transition requiring investment is a business oppor-
tunity for the financial sector to apply its skills in risk pricing as well as
return and profitability assessments.
• The green transition is no different. The financing of green projects is
paramount for the transition. Without financing, the world cannot
make the necessary investments.
• The green transition faces a special set of challenges for risk manage-
ment, which I will get back to.
From a central bank and financial stability perspective, proper risk assess-
ment associated with climate change and the energy transition is particu-
larly important.
• Sound risk management means that risks should be held on balance
sheets that have the capacity to absorb these risks if they materialise.
• Banks and investors must take account of climate- and energy-related
risks in their credit policies and capital allocation.
• This implies a special focus on the risk assessment of investments in
assets that may become 'stranded' in the transition, such as fossil-in-
tensive investments.
• Green companies must undergo the same scrutiny as regular compa-
nies.
The recent energy crisis in Europe illustrates how climate- and energy-re-
lated risks are already first order.
Slide 8
Climate-related risk pricing is difficult, but essential, in the financial sec-
tor. And often, climate-related risks are not well priced.
Poorly priced climate-related risks are a financial stability concern, the ex-
tent of which we investigate at Danmarks Nationalbank.
• We analyse how climate change and transition risks will affect the
Danish economy and financial system.
• The aim of this work is to facilitate a dialogue with the financial sector
about risks and opportunities.
The slide offers some examples of our analytical work.
• The pieces include work on flood risk in the housing market, energy
requirements on real estate and pricing of risk in equity markets.
• The gist of the analytical work suggests that climate-related risks tend
to be underpriced, although the extent to which this is the case seems
to be decreasing.
• Climate-related risks are becoming increasingly salient in financial
markets.
Slide 9
Proper risk pricing is challenged by the fact that climate-related expo-
sures are opaque.
• The assessment of climate change and transition-related risks cannot
be based on historical data and distributions in the way that risk as-
sessments are traditionally made. New scenario-based techniques for
risk pricing are being developed.
• Moreover, properly assessing climate-related risks requires new data
and a higher level of transparency of exposures in balance sheets.
• Many companies lack knowledge about - or do not share - the green-
house gas emissions in their supply chains.
• This makes it difficult for banks and investors to assess how a com-
pany's failure to transition will impact its profitability.
A higher degree of transparency and systematic and standardised collec-
tion of data across companies and value chains, including financial port-
folios, is necessary.
• Many initiatives to increase the level of transparency of climate-re-
lated exposures are under way or being implemented.
• The Task Force on Climate-related Financial Disclosures (TCFD) has
been central in expanding voluntary disclosures.
New EU regulation introduces stricter requirements for both financial and
non-financial businesses' disclosures.
• The Corporate Sustainability Reporting Directive (CSRD) and Sustaina-
ble Finance Disclosure Regulation (SFDR) are prominent examples of
disclosure regulation.
• Climate-related transparency is also adhered to by European central
banks, with the introduction of the common minimum disclosures of
the Eurosystem.
I will come back to Danmarks Nationalbank's own disclosures later in the
presentation.
Slide 10
Finally, I will turn to how climate change affects our work at Danmarks
Nationalbank.
Slide 11
Danmarks Nationalbank's climate-related activities can be categorised
under three headings.
• They relate to our central bank mandate, our aim to fulfil this man-
date in a responsible way and our role as a government debt man-
ager.
• The activities are anchored in a cross-bank analytical agenda, reflect-
ing their interdisciplinary nature.
Under our mandate, we analyse how climate change and the green tran-
sition will affect the Danish economy and financial system.
• The work results directly from our objective to ensure a robust econ-
omy with stable prices and financial stability.
• Our most prominent role in - and contribution to - the transition is to
live up to our mandate of ensuring a robust economy with financial
stability. This supports stable planning horizons for transition policies
as well as for companies and financial planning.
As a public institution, we aim to organise our work responsibly.
• We aim to invest our financial portfolios responsibly, and this includes
an aim to meet the climate goals of the Paris Agreement to transition
to net zero by 2050.
• We have similar goals for our own carbon footprint as an organisa-
tion.
We issue green government bonds on behalf of the Ministry of Finance.
• Our debt management office manages Denmark's government debt.
• This includes the management of government funds, preparation of
an issuance strategy and issuance of government securities. Under
this heading, we started issuing so-called green government bonds
last year.
I will comment on each of these aspects in the final part of my presenta-
tion.
Slide 12
Climate change can challenge price and financial stability.
• Heat stress or lower crop yields lead to chronically lower output
abroad, with spill-over effects for Denmark.
• Heat waves, droughts and floods cause prices and income to fluctuate
in Denmark and abroad.
• Flooding, or expectations of flooding, reduces the market value of
mortgaged real estate and can lead to losses among credit institu-
tions.
The green transition can also challenge price and financial stability.
• Transition policies can change relative prices. Policies that result in
carbon emissions being priced can lead to higher prices for certain
goods and services. Subsidies, on the other hand, can reduce certain
prices and hamper the competitiveness of non-subsidised products.
• An increased reliance on solar and wind energy could lead to greater
short-term volatility in energy prices because their supply is more ine-
lastic and fluctuating.
• 'Stranded' assets - e.g. if polluting companies go bankrupt or prices
of homes that are expensive to heat drop - could lead to credit
losses.
We work to understand how climate change and the transition will affect
the price and financial stability objectives of Danmarks Nationalbank.
• This includes analyses of the impact of energy prices on inflation and
stress testing the banking system for climate risks.
• Based on our analyses, we make recommendations to other authori-
ties or the financial sector about how climate-related risks are best
addressed, to reduce price and financial stability risks.
• We also investigate the pricing of climate-related risks among market
participants. This sheds light on the current salience of these risks.
• We support standards for transparency as well as a systematic collec-
tion of data on companies' climate-related financial exposures. Cli-
mate-related financial data allow financial firms to benchmark them-
selves against peers.
• The aim of this work is to raise awareness and support the pricing of
climate-related risks.
Slide 13
We expect financial firms to increasingly assess and disclose climate rele-
vant data, and this includes ourselves.
Danmarks Nationalbank published its first climate-related disclosure re-
port in March this year, as part of our annual reporting.
• The disclosure covers bonds issued by governments and regional au-
thorities as well as equities and corporate bonds invested via ex-
change-traded funds, ETFs.
• These asset classes amounted to approx. kr. 50 billion - or 10 per cent
- of the market value of foreign reserves at the end of 2022.
Disclosure is currently not possible for the remaining part of the foreign
exchange reserve.
• There is not sufficient data or widely accepted definitions of climate
footprints for the remaining asset classes.
• It is our ambition to broaden the disclosure as disclosure standards
and data are developed.
Some caveats are in order before interpreting the disclosed figures.
• Climate-related disclosure of financial portfolios is an area under de-
velopment. One should therefore be careful when interpreting the dis-
closed figures.
• The metrics measure emissions of greenhouse gasses from the eco-
nomic activity generated by the issuers.
• The metrics do not express the effect on actual greenhouse gas emis-
sions when individual investors issue, purchase or sell the associated
assets.
• On top of these limitations, there are unresolved issues with double-
counting and other inconsistencies across asset classes.
We do not use the disclosed numbers as a parameter in the management
of the FX reserve.
• The primary objectives of the FX reserve are to support the fixed ex-
change rate, financial stability and international obligations of Dan-
marks Nationalbank.
• Given these objectives, we aim, as far as possible, to invest our finan-
cial portfolios in line with our policy for responsible investing, and no-
tably, in line with the Paris Agreement.
• The metrics are based on current carbon emissions, whereas the Paris
Agreement sets a goal of climate neutrality by 2050.
Slide 14
Following the approach of the ECB, we report the climate footprint using
three distinct metrics.
• The metrics are the weighted average carbon intensity (WACI), car-
bon footprint and absolute financed emissions.
• The metrics measure different aspects of the emissions associated
with the investments, and all three have advantages as well as draw-
backs.
• I will not go into these here, as it quickly becomes technical.
The footprint from government bonds fell slightly from 2021 to 2022.
• The lower WACI reflects that the share of our bond holdings that was
invested in countries with high emissions relative to GDP dropped in
2022, as compared with 2021.
• This reflects a restructuring of the bond holdings that had nothing to
do with the climate.
The footprint from the ETFs also fell from 2021 to 2022.
• The lower WACI indicates that a smaller part of our ETF holdings was
based on equity and corporate bonds issued by companies with high
emissions relative to revenue in 2022, as compared with 2021.
• This was intended, as the ETF holdings were shifted towards ETFs that
comply with the EU's Paris-Aligned Benchmark.
Slide 15
I now turn to our issuance of green governments bonds on behalf of the
Danish state, which we started in 2022.
First some background: The green bond market has increased signifi-
cantly over the previous years, but it remains small.
• Prevailing market conditions caused debt issuance volumes to decline
in 2022, across all categories of bonds, green bonds included.
• Sovereign green bonds made up around 14 per cent of total green
bond issuance globally, see the right-hand chart. More than 50 per
cent was issued by companies.
• However, the green government bond market remains small, with
around 3 per cent of overall bond issuances.
We decided, together with the Danish government, to issue green gov-
ernment bonds starting in 2022.
• Issuance of Danish green government bonds is expected to be
around 15 per cent of our total issuance of domestic bonds in 2023.
• The green government bonds are still a small share of outstanding
government bonds, constituting just around 2.5 per cent.
Slide 16
Our motivation for issuing green bonds is two-fold.
• First, we aim to contribute to the development of the green financial
market, which has the potential to play an increasingly important role
in directing investment towards sustainable projects.
• We notably help set a standard for the Danish green bond market
and add critical mass with a high-quality dark green and AAA-rated
green bond.
• Second, issuance of a green bond contributes to maintaining a broad
and diversified investor base for Danish government bonds and ac-
commodates increased demand for green assets from investors.
The Danish government green bond follows the highest standards.
• It is important to follow best practice and support regulation that en-
hances transparency.
• We are at the forefront of market standards by evaluating and select-
ing green spending on the basis of the EU's taxonomy for sustainable
activities. This helps promote transparency, which is crucial to build-
ing trust between the issuer and investor.
• The high quality and transparency are supported by the Dark Green
rating, which is the highest climate and environmental accreditation
possible by the external verifier Cicero.
• We monitor market developments - including the EU Green Bond
Standard - and gradually seek to adapt our programme to the best
market practice and to meet requirements and expectations from the
investor community.
We use a 'twin bond' concept to ensure adequate liquidity.
• The concept was first launched by Germany in 2020.
• Green bonds are issued with the same financial characteristics as a
regular Danish government bond, i.e. same cashflow.
• Investors have the option to swap their green twin bond one-to-one
with a corresponding and more liquid conventional twin bond.
• The twin model means that price differences, if any, are quite trans-
parent. The 'greenium' is clearly identified.
Slide 17
Our goal is to issue up to kr. 10 billion this year. In comparison, total gov-
ernment issuance is kr. 65 billion.
• As the figure shows, we issued an amount of 15 billion of green gov-
ernment bonds in 2022.
• This will bring the total outstanding amount of Danish green govern-
ment bonds up to kr. 25 billion in 2023.
• The new 10-year green government bond series will be issued in the
2nd half of 2023 in accordance with the central government's Green
Bond Framework.
• The series will follow the twin bond concept and thus have the same
financial characteristics as the new benchmark 10-year nominal bond
maturing in 2033.
There is currently a green premium of 3-4 basis points on the existing 10-
year Danish green government bonds.
• The opening of our first green bond in January 2022 was met with
overwhelming demand and an initial 'greenium' of 5 basis points.
• This was more than expected and higher than most other European
green government bonds.
• Since then, the size of the green premium has varied between 1-5 ba-
sis points.
• The green premium declined in the early part of 2023, at a time when
market volatility was high and market focus was elsewhere, at least
for some investors.
It is difficult to predict the green premium of the new 10-year green
bond. It is not our goal to issue at a specific green premium.
Slide 18
Transparency about the use of proceeds from the green government
bonds is essential for buyers of green bonds.
• An allocation and an impact report are published to achieve sufficient
transparency.
• The impact report for eligible expenditures in 2021 was published ear-
lier this year.
Allocation report: The central government is committed to reporting that
proceeds have been allocated in accordance with the current Green Bond
Framework.
• Eligible green expenditures under the current framework are focused
on Denmark's two highest-emitting sectors: transportation and en-
ergy.
• These expenditures are largely aligned with the EU's Taxonomy.
• In the transportation sector, the framework includes direct operating
and capital expenditures for the rail network infrastructure and indi-
rect expenditure through a tax exemption for zero- and low-emission
vehicles.
• The framework includes direct subsidy schemes and indirect expendi-
tures through a tax exemption scheme, to incentivise the transition to
solar and wind power.
• With the proceeds from 2022 and the proceeds planned for 2023, is-
suance of approx. kr. 20 billion will be allocated to clean transporta-
tion, and approx. kr. 3 billion will be allocated to renewable energy.
Impact report: The central government is committed to reporting on ex-
pected climate and environmental impact through an impact report.
• The report includes detailed descriptions of the allocated green ex-
penditures along with an estimation of environmental impacts.
• Approx. 5 Mton CO2e emissions were avoided in 2021, according to
the aggregated impact metric.
• Other output and environmental impact metrics are included in the
report, such as an estimated production capability of 12,000 GWh in
renewable energy.
Slide 19
We are still far from reaching the climate goals of the Paris Agreement.
The energy transition is behind schedule and has much ground to cover.
Recent events have shown that an abrupt transition with supply stops is
costly in terms of risks to inflation and can lead to financial turmoil.
Climate-related risk pricing is central to directing financing for green pro-
jects. The attention of the financial sector to climate issues has grown in
recent year.
• Some evidence that attention to - and pricing of - climate risks is in-
creasing, but more needs to be done.
• Progress toward disclosures to support risk management is welcome.
• I expect we will continue to see new issuers supporting the develop-
ment of green capital markets.
Climate change is macro-critical, and most activities and objectives at
Danmarks Nationalbank are affected by climate considerations.
• Our most important contribution to the transition is to live up to our
mandate of ensuring a robust economy with price and financial stabil-
ity.
• This means taking account of and assessing climate-related risks to
the macroeconomy and financial system.
• Moreover, together with the Danish government, we support the de-
velopment of green capital markets by issuing green government
bonds.
DANMARKS
NATIONALBANK
Financing and the energy transition
Governor Signe Krogstrup
11th Annual Nordic AAA Seminar, 11 May 2023
Agenda
Status on climate change and financing
Role of the financial sector in the
energy transition
Climate-related activities in
Danmarks Nationalbank
Status on climate change and financing
The world's energy supply remains fossil-based,
and electrification challenges remain
The world's energy supply remains largely fossil-based, and
Challenges to an electrification of the
global temperatures continue to rise
European energy supply
Exajoule °C
600 1.8
Renewable energy
•
Stability of supply
Nuclear energy
500 1.5
Gas
•
Untested technologies, e.g. Power-to-X
Oli
Coal
400 1.2
•
Access to minerals and rare earths
300 0.9
200 0.6
100 0.3
Temperature increase relative to the average temperature
in 1951-1980 (right axis)
0 0
90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20
Note: The chart shows the annual global energy consumption by source and temperature increase.
Source: Macrobond.
Building new energy supply requires financing
Demand for new types of energy can change fast with the right
Supply of renewable energy requires financing.
incentives: e.g. gas consumption in the EU fell strongly in 2022
Estimated funding necessary towards 2030:
Billion cubic metres Per cent
12 20
America Consumption of gas relative to
• World:
0.6-1 per cent of GDP annually,
same month in 2020 and 2021
Africa
(right axis)
Middle East
according to the IEA (2021) and IMF (2021)
10 10
• World:
2 per cent of GDP annually,
8 0
according to the IEA (2023)
6 -10
• EU: 2 per cent of GDP or EUR 470bn annually,
according to the European Commission (2020)
4 -20
• Denmark: DKK 500-600bn accumulated,
2 -30
according to Finance Denmark (2022)
Role of the financial sector in the
energy transition
The financial sector's role - in the transition and otherwise - is to
provide capital, supported by sound risk-return analysis
Climate-related risks are often not well priced
Disclosure standards and a systematic collection of data
support risk management
Climate-related exposures are opaque
• Climate change and the green transition have no historical precedent
•
Companies lack data on their supply chains' reliance on greenhouse gas emissions
Lack of transparency hinders risk management
•
Banks and investors need data to assess the impact on corporate profitability
of a company's failure to transition
Disclosures contribute to transparency
•
Voluntary standards are expanding these years (e.g. TCFD and IFRS/ISSB)
•
EU requirements take effect these years (e.g. CSRD and SFDR)
Climate-related activities in
Danmarks Nationalbank
RESPONSIBILITY
MANDATE Own
Collection of
carbon
financial
footprint
climate data
Financial analysis
Responsible investment
(e.g. climate stress test)
AGENT OF
THE STATE
Macroeconomic analysis
(e.g. scenarios for inflation) Issuance of green
government bonds
ANALYTICAL AGENDA ACROSS THE CENTRAL BANK
Climate change, the green transition
and Danmarks Nationalbank's objectives
IMPLICATIONS FOR
CONSEQUENCES OF CONSEQUENCES OF
DANMARKS
CLIMATE CHANGE GREEN TRANSITION
NATIONALBANK
Shocks to prices and income Effects of climate policies, such Understanding implications for
because of a warmer climate as a carbon tax or subsidies price and financial stability
and natural disasters
More volatile energy prices Recommendations for other
Financial losses due to
authorities and the financial
natural disasters
sector
Financial institutions' exposure
to 'stranded' assets
Pricing analyses
Transparency and systematic
collection of data on exposures
Disclosure of the climate footprint
from Denmark's FX reserve
The disclosure covers bonds issued by governments and
Disclosure currently covers 10 per cent of the
regional authorities as well as ETFs
FX reserve
Per cent
Asset classes in
•
Disclosure standards do not exist for the
foreign exchange
Covered by disclosure
remaining asset classes
reserve
10
• We monitor the development in metrics and
1
data to broaden the disclosure in the future
2
10
Disclosure standards are not without problems
8
79
•
Double-counting and other inconsistencies
Money market products
exist across asset classes
Bonds issued by supranational institutions etc.
Covered bonds
• Disclosed figures do not express the effect
Bonds issued by central governments and regional authorities
on actual emissions of investors owning the
Equities and corporate bonds (ETFs)
Note: The holdings are stated at market value as of 30 December 2022, excluding gold and IMF loans.
assets
Climate footprint from the FX reserve
Bonds issued by central
Equities and corporate bonds
governments and regional
(ETFs)
authorities
2022 2021 2022 2021
Allocation of emissions
Production-based Scopes 1-2
Weighted average carbon intensity
198 216 56 106
(tonnes of per million euro in GDP or revenue)
CO2e
footprint
CO2e
175 248 19 53
(tonnes of per million euro invested)
CO2e
Absolute financed emissions
965,691 2,107,460 26,806 98,176
(tonnes of
CO2e)
Share of market value of foreign exchange reserve in 2022
7.9 2.0
(per cent)
The market for green bonds has grown significantly,
despite a drop in issuances last year
Annual issuance by region Annual issuance by issuer type
Billion, USD Billion, USD
700
700
600 600
Sovereign
500 500
Loan
Non-financial business
North America
400 400
Local government
Supranational
Government-backed entity
Latin America
300
300
Europe Financial business
Asia-Pacific Development bank
200
200
Africa
ABS
100
100
0
0
2014 2015 2016 2017 2018 2019 2020 2021 2022
Danish green government bonds:
Aim and design
Motivation Follows the highest market standards
• development of •
Support the Largely aligned with the EU Taxonomy
green financial markets
•
Dark Green rating
• Maintain a broad and
diversified investor base
in
Danish government bonds
Issuance by twin bond concept
• Well-known and proven concept
•
Supports the liquidity of the green bond
Green premium levels reflect continued investor demand
for green Danish government bonds
Planned issuance of additional kr. 10 billion under the Investors' willingness to pay a green premium remains,
government's Green Bond Framework in 2023 despite market volatility
Accumulated issuance, kr. billion Yield to maturity p.a., per cent Spread, basis points
30
4.0 8
The green bond issuance volume is
expected to reach kr. 25 billion in 2023
3.5 7
25
DGB 0.00 per cent 2031
3.0 6
20 DGB per cent 0.00 2031 green
2.5 5
15
2.0 4
1.5 3
10
1.0 2
Green premium (right axis)
5
0.5 1
0
0.0 0
2022 2023
Jan-22 Mar-22 May-22 Jul-22 Sep-22 Nov-22 Jan-23 Mar-23
Ensuring transparency of the use of proceeds from green
government bonds
Note: The revenue generated from the Danish sovereign green bond issuance in 2022 and 2023 will finance eligible green expenditures in 2021 and 2022.
The remaining revenue generated in 2023 will finance prognosed eligible green expenditures in 2023.
Source: Danmarks Nationalbank.
Concluding remarks
The green energy transition is behind schedule, and
its financing needs are enormous
Improving climate-related risk pricing is essential
for the financial sector to provide financing for the transition
Danmarks Nationalbank supports the transition through economic
stability, macro risk analysis and development of green capital markets