New ESG benchmark for asset servicing
26 Nov 2025
Tahlia Kraefft speaks with Helle Eis Pallesen, senior treasury manager in Government Debt Management Danmarks Nationalbanken, on how Denmark’s landmark launch of a green bond aligned with the European Green Bond Standard sets a precedent for other sovereigns
Image: Danmarks Nationalbanken
On 23 September this year, Denmark became the first sovereign issuer of a green bond aligned with the European Green Bond Standard (EuGBS) establishing a new global benchmark for sovereign green finance.
Green bond issuance has slowed in the last few years alongside uncertainty over regulation, political backlash against ESG, and higher borrowing costs.
Denmark’s successful issuance represents a strong sign to other European countries that could push momentum back in support of green sovereign debt.
The higher bar set for sovereign ESG (Environmental, Social, and Governance) finance requires enhanced transparency, increased data and reporting accountability, and greater verification of sustainability claims.
Despite these greater reporting demands, there are no significant operational changes imposed on asset servicers.
New European Green Bond Standard
Eis Pallesen highlights that Denmark intended to strengthen and legitimise global green capital markets, through the issuance of the AAA-rated sovereign green bond.
Denmark aims to support a common standards and regulatory alignment by leading by example as the first sovereign to fully align with the EuGBS. to enhance transparency, Eis Pallesen explains: “The European green bond standard also being regulated, and also be a common language for what we talk about when we talk about green bonds, and that’s important for us to support.”
Additionally, she mentions they sought to maintain a diversified investor base, through attracting existing green investors and new ESG-mandated investors, some of whom could not previously invest in Danish krone-denominated bonds.
“There’s a large demand for green assets out there. So by issuing a green bond, and an EU green bond, we not only support regulation and a common language and support the green markets, but also offer both existing and new customers a product that is in demand.”
This ESG bond issuance represents the practicality of aligning sovereign issuance with stringent EU sustainability standards.
Issuance via syndication
Denmark has reformed its 2021 green bond framework to fully align with the EuGBS, ensuring strict compliance with EU criteria.
Sovereign bonds typically experience challenges due to auction-based issuance, which makes Eu GBS alignment technically difficult. Eis Pallesen, states the country overcame the issue by creating a flexible structure with multiple taps and treating its fact sheet as the programme document.
“Our big hurdle was that we are opening bonds, typically via auctions. This time around, we were opening via syndication, but we will auction up the bonds afterwards, like we do for our regular nominal bonds, and like we’ve done with our two outstanding green bonds.”
The bond finances projects that comply with EU GBS criteria that are key areas for obtaining Denmark’s ambitious climate goals, such as the 70 per cent CO2 reduction target by 2030.
These include: green transportation, renewable energy, sustainable land use and agriculture transformation.
Minor operational changes for settlement and custody
Despite the greater transparency and regulatory requirements, Eis Pallesen, notes the issuance does not introduce any significant operational changes for custodians and asset servicers. The green bond settles and trades the same way a conventional Danish bond does.
Eis Pallesen remarks that all the tracking is tied directly to the Budget Act, not external data systems: “All the tracking and administrative extra burden or tasks related to issuing green versus conventional bonds. It really lies within the ministries in tracking these expenditures, but they have to do that either way, because they have to do the governance accounting and also do the budget for next year.”
Additionally custodians and asset servicers do not face new settlement complexities due to Denmark’s use of a twin-bond structure. Investors can change between green and conventional bonds without facing technical issues. Custodians, however, do not have access to intricate spending data from the government ministries, resulting in the burden of tracking ESG compliance remaining with the sovereign.
Eis Pallesen adds that this is the opportunity for new services that assist investors to track ESG performance through dashboards or KPI visualisations. She mentions that these tools need to be further developed with improved access to data.
Future tracking of ESG Data
Eis Pallesen, speculates i there will be broader integration of ESG data in the future so investors can monitor ESG performance across the entire sovereign budget. This will consider a full breakdown of:percentage of EU GBS-aligned expenditures, green-bond-aligned expenditures, and percentage in other sustainability categories such as social or community impact.
She says universal standards will need to be developed for such integration to be effective, with clear definitions of ‘green’ and ‘social’. Government data systems will also have to be harmonised for more streamlined access and analysis. As more sovereigns take up green bond standards, the potential for standardised ESG data reporting increases, generating increased transparency and accountability in the green finance market.
Greater transparency in tracking, reporting and governance
Proceeds are deposited in Denmark’s central government account with allocations monitored through the DK Budget Act. Government ministries must oversee that green expenditures are in line with EU GBS compliance. The inter-ministerial working group is made up of numerous ministries including finance, transport, climate and energy, and green transition, this group monitors expenditures, compliance with ‘Do-No-Significant-Harm’ principles, and publishes annual reports.
Strong investor response
Denmark attracted more than DKK12 billion (US$1.9 billion) of orders for its new green bond, nearly double the deal size. According to Eis Pallesen, investors have welcomed the green bond.
She notes it has attracted a broader pool of ESG-driven global investors: “It’s been really, really positively received on the investor side. We’ve mostly gotten very positive feedback. We’ve also, for the first time, seen some investors that usually can’t buy DKK-denominated bonds looking at this because they have an enhanced ESG mandate that allows them to buy other currency.”
There has been an initial adjustment period for investors to navigate the EU GBS framework. Eis Pallesen, adds: “Investors are quite pleased with the very advanced work being done on all the documentation on this, and I’m quite pleased and happy with what has been put out there. Also there is some getting used to as an investor to the EU GBS label, together with the IGMA green bond principle label and how to both value, but also look at this and get more familiar with this new standard as well.”
Investor profiles
The biggest share (42 per cent) of the green bond was purchased by asset managers, followed by pension funds and other institutions (27 per cent).
Eis Pallesen, notes that the Danish pension and insurance sectors were already committed to high ESG standards: “Quite advanced in terms of having a very fairly large green mandate given that there’s a lot of pensioners that actually decide actively to invest more of their pension into green.”
The remaining amount was bought by banks (22 per cent).
Eis Pallesen, remarks that ETFs, and other institutional investors who purchased the remaining share of bond have a strong focus on sustainable assets: “Same as goes to investment funds and ETFs around, both domestically and globally. Those are the big investor types, typically, that we see, both domestically and internationally.”
Domestic investors dominated making up 75 per cent of allocations, with overseas demand highest from Asia (9 per cent) and the UK (9 per cent), with the rest made by buyers in the Benelux, other Nordic countries and the Deutschland, Austria, and Confoederatio Helvetica (DACH) region.
The sectors that will benefit from the green bond include energy and infrastructure, land use and agriculture.
Investments will support key energy grid upgrades, offshore wind subsides, and clean transportation modernisation projects.
It will also underpin agricultural land conversion to forest, in accordance with Denmark’s CO2 reduction targets. Denmark is committed to addressing climate change and attaining its sustainability goals by 2030.
Sovereign green finance milestone
Denmark’s green bond issuance represents a key milestone in sovereign green finance, demonstrating that sovereign alignment with the EU Green Bond Standard is both practicable and robust. While operational changes imposed on asset servicers are minimal, the wider implications for ESG transparency and data accountability will have an enduring impact.
For both asset servicers and investors, Denmark’s green bond issuance is a sign that the ecosystem of sustainable finance is changing, and could help push back momentum in favor of sovereign green debt, after political pushback against ESG in recent times.
As more investors align with EU GBS and regulatory standards develop, stakeholders could face pressure to stay ahead of the curve in taking on improved ESG reporting and governance frameworks.
Green bond issuance has slowed in the last few years alongside uncertainty over regulation, political backlash against ESG, and higher borrowing costs.
Denmark’s successful issuance represents a strong sign to other European countries that could push momentum back in support of green sovereign debt.
The higher bar set for sovereign ESG (Environmental, Social, and Governance) finance requires enhanced transparency, increased data and reporting accountability, and greater verification of sustainability claims.
Despite these greater reporting demands, there are no significant operational changes imposed on asset servicers.
New European Green Bond Standard
Eis Pallesen highlights that Denmark intended to strengthen and legitimise global green capital markets, through the issuance of the AAA-rated sovereign green bond.
Denmark aims to support a common standards and regulatory alignment by leading by example as the first sovereign to fully align with the EuGBS. to enhance transparency, Eis Pallesen explains: “The European green bond standard also being regulated, and also be a common language for what we talk about when we talk about green bonds, and that’s important for us to support.”
Additionally, she mentions they sought to maintain a diversified investor base, through attracting existing green investors and new ESG-mandated investors, some of whom could not previously invest in Danish krone-denominated bonds.
“There’s a large demand for green assets out there. So by issuing a green bond, and an EU green bond, we not only support regulation and a common language and support the green markets, but also offer both existing and new customers a product that is in demand.”
This ESG bond issuance represents the practicality of aligning sovereign issuance with stringent EU sustainability standards.
Issuance via syndication
Denmark has reformed its 2021 green bond framework to fully align with the EuGBS, ensuring strict compliance with EU criteria.
Sovereign bonds typically experience challenges due to auction-based issuance, which makes Eu GBS alignment technically difficult. Eis Pallesen, states the country overcame the issue by creating a flexible structure with multiple taps and treating its fact sheet as the programme document.
“Our big hurdle was that we are opening bonds, typically via auctions. This time around, we were opening via syndication, but we will auction up the bonds afterwards, like we do for our regular nominal bonds, and like we’ve done with our two outstanding green bonds.”
The bond finances projects that comply with EU GBS criteria that are key areas for obtaining Denmark’s ambitious climate goals, such as the 70 per cent CO2 reduction target by 2030.
These include: green transportation, renewable energy, sustainable land use and agriculture transformation.
Minor operational changes for settlement and custody
Despite the greater transparency and regulatory requirements, Eis Pallesen, notes the issuance does not introduce any significant operational changes for custodians and asset servicers. The green bond settles and trades the same way a conventional Danish bond does.
Eis Pallesen remarks that all the tracking is tied directly to the Budget Act, not external data systems: “All the tracking and administrative extra burden or tasks related to issuing green versus conventional bonds. It really lies within the ministries in tracking these expenditures, but they have to do that either way, because they have to do the governance accounting and also do the budget for next year.”
Additionally custodians and asset servicers do not face new settlement complexities due to Denmark’s use of a twin-bond structure. Investors can change between green and conventional bonds without facing technical issues. Custodians, however, do not have access to intricate spending data from the government ministries, resulting in the burden of tracking ESG compliance remaining with the sovereign.
Eis Pallesen adds that this is the opportunity for new services that assist investors to track ESG performance through dashboards or KPI visualisations. She mentions that these tools need to be further developed with improved access to data.
Future tracking of ESG Data
Eis Pallesen, speculates i there will be broader integration of ESG data in the future so investors can monitor ESG performance across the entire sovereign budget. This will consider a full breakdown of:percentage of EU GBS-aligned expenditures, green-bond-aligned expenditures, and percentage in other sustainability categories such as social or community impact.
She says universal standards will need to be developed for such integration to be effective, with clear definitions of ‘green’ and ‘social’. Government data systems will also have to be harmonised for more streamlined access and analysis. As more sovereigns take up green bond standards, the potential for standardised ESG data reporting increases, generating increased transparency and accountability in the green finance market.
Greater transparency in tracking, reporting and governance
Proceeds are deposited in Denmark’s central government account with allocations monitored through the DK Budget Act. Government ministries must oversee that green expenditures are in line with EU GBS compliance. The inter-ministerial working group is made up of numerous ministries including finance, transport, climate and energy, and green transition, this group monitors expenditures, compliance with ‘Do-No-Significant-Harm’ principles, and publishes annual reports.
Strong investor response
Denmark attracted more than DKK12 billion (US$1.9 billion) of orders for its new green bond, nearly double the deal size. According to Eis Pallesen, investors have welcomed the green bond.
She notes it has attracted a broader pool of ESG-driven global investors: “It’s been really, really positively received on the investor side. We’ve mostly gotten very positive feedback. We’ve also, for the first time, seen some investors that usually can’t buy DKK-denominated bonds looking at this because they have an enhanced ESG mandate that allows them to buy other currency.”
There has been an initial adjustment period for investors to navigate the EU GBS framework. Eis Pallesen, adds: “Investors are quite pleased with the very advanced work being done on all the documentation on this, and I’m quite pleased and happy with what has been put out there. Also there is some getting used to as an investor to the EU GBS label, together with the IGMA green bond principle label and how to both value, but also look at this and get more familiar with this new standard as well.”
Investor profiles
The biggest share (42 per cent) of the green bond was purchased by asset managers, followed by pension funds and other institutions (27 per cent).
Eis Pallesen, notes that the Danish pension and insurance sectors were already committed to high ESG standards: “Quite advanced in terms of having a very fairly large green mandate given that there’s a lot of pensioners that actually decide actively to invest more of their pension into green.”
The remaining amount was bought by banks (22 per cent).
Eis Pallesen, remarks that ETFs, and other institutional investors who purchased the remaining share of bond have a strong focus on sustainable assets: “Same as goes to investment funds and ETFs around, both domestically and globally. Those are the big investor types, typically, that we see, both domestically and internationally.”
Domestic investors dominated making up 75 per cent of allocations, with overseas demand highest from Asia (9 per cent) and the UK (9 per cent), with the rest made by buyers in the Benelux, other Nordic countries and the Deutschland, Austria, and Confoederatio Helvetica (DACH) region.
The sectors that will benefit from the green bond include energy and infrastructure, land use and agriculture.
Investments will support key energy grid upgrades, offshore wind subsides, and clean transportation modernisation projects.
It will also underpin agricultural land conversion to forest, in accordance with Denmark’s CO2 reduction targets. Denmark is committed to addressing climate change and attaining its sustainability goals by 2030.
Sovereign green finance milestone
Denmark’s green bond issuance represents a key milestone in sovereign green finance, demonstrating that sovereign alignment with the EU Green Bond Standard is both practicable and robust. While operational changes imposed on asset servicers are minimal, the wider implications for ESG transparency and data accountability will have an enduring impact.
For both asset servicers and investors, Denmark’s green bond issuance is a sign that the ecosystem of sustainable finance is changing, and could help push back momentum in favor of sovereign green debt, after political pushback against ESG in recent times.
As more investors align with EU GBS and regulatory standards develop, stakeholders could face pressure to stay ahead of the curve in taking on improved ESG reporting and governance frameworks.
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