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  • Writer's pictureCarsted Rosenberg

Navigating the Green Finance Market in Denmark

Updated: Mar 7

The financial landscape is undergoing a significant transformation, driven by a growing awareness of the need for environmental sustainability. In this evolving environment, green finance emerges as a powerful driver of positive change. But what exactly is green finance, and how does it function?

Green finance encompasses a broad range of financial activities that support environmentally sustainable projects and initiatives. This includes:

  • Investments: These investments target sectors like renewable energy, energy efficiency, pollution control, conservation, and sustainable land management.

  • Financial Products: Green bonds, sustainability-linked loans, and climate-aware insurance products are some key examples.

  • Policies: These policies aim to develop a more sustainable financial system, such as green taxonomies (classifications of sustainable activities) and mandatory climate-related disclosures for companies.

The overarching goal of green finance is to align the financial system with the principles of sustainable development. This means adapting financial products to specific green key performance indices and benchmarks.

Green Bonds and Green Loans

Green bonds have emerged as a recent financial instrument within financial markets. They function similarly to traditional bonds, where investors lend money to an issuer (government, company, etc.) in exchange for a specified interest rate and the return of their principal at maturity. However, the crucial distinction lies in the use of proceeds. Green bonds aim to finance projects with environmental benefits, such as renewable energy development, clean transportation initiatives, or sustainable building projects. Transparency is a cornerstone of green bonds. Issuers are required to clearly define the environmental projects the funds will support. Additionally, they typically provide regular reports on how the funds are being used and the environmental impact achieved. This transparency helps investors make informed decisions and ensures the integrity of the green bond market.

Green loans are another credit facility variant that has emerged as a green finance product. These loans are provided by banks and other financial institutions to companies or individuals specifically for projects that bring environmental benefits. Similar to green bonds, the funds must be used for specific, pre-defined environmentally friendly purposes. These loans can act as a valuable source of financing for a wide range of sustainable initiatives. Green loans often adhere to specific principles like the Green Loan Principles (GLP) to ensure transparency and credibility. GLP are a set of voluntary guidelines created to ensure transparency and encourage the growth of the green loan market. They provide a framework for defining what qualifies as a green loan and establish standards for how these loans should be structured and managed. The GLP are maintained by the Loan Markets Association (LMA) for the European market, the Asia Pacific Loan Market Association (APLMA) for the APAC market, and the Loan Syndications and Trading Association (LSTA) for the US market. The GLP provide guidelines for defining eligible projects, how funds will be used, project selection and management processes and crucially reporting and disclosure of environmental impact.

For the issuer or the borrower under a green financing, the key benefits are that the instruments are intended to offer lower interest rates or more preferential terms than traditional loans due to their focus on sustainability. In addition to the very tangible benefits, they are designed to enhance a borrower's reputation as an environmentally responsible corporation, and to align its financing with the company's sustainability goals.

For the lenders and bondholders, green financing instruments open up new lending opportunities within an expanding market. Some governments offer incentives or preferential treatment to lenders who support green projects, which can potentially lead to tax benefits or lower regulatory burdens. Participating in green lending can help lenders stay ahead of emerging regulations surrounding climate-related financial disclosure and risk management. In addition, Offering green loans shows a lender's commitment to sustainability and aligns them with growing investor and public interest in responsible finance. This positive branding can attract environmentally conscious clients and investors, boosting the lender's reputation. Green financing may therefore also attract a wider pool of institutional investors and thereby offer wider sources of capital.

Key Performance Indicators

Green bonds and green loans incorporate environmental Key Performance Indicators (KPIs) to measure the environmental impact of the project or activity being financed. These KPIs are crucial for ensuring that the financing aligns with its green label and contributes to positive environmental outcomes. Some common environmental KPIs used in green loans:

  • Reduced greenhouse gas (GHG) emissions: This is a common key metric for many green credit facilities, particularly those supporting renewable energy projects or energy efficiency initiatives. The KPI measures the expected or actual reduction in tons of CO2 equivalent emissions per year.

  • Increased use of renewable energy: This KPI tracks the amount of renewable energy generated (e.g., megawatt-hours) or the percentage of energy mix derived from renewable sources as a result of the project financed by the loan.

  • Improved energy efficiency: Measured through metrics like reduced energy consumption per unit of production or a decrease in the building's energy rating.

  • Resource conservation: This KPI involves tracking the reduction in water usage (e.g., gallons per year), sustainable waste management practices implemented, or the use of recycled materials in construction or manufacturing.

  • Biodiversity conservation: For projects impacting land use or natural habitats, KPIs may be included to track protected areas preserved, restored, or sustainably managed, or the number of species protected or their population growth.

It is important to note that the specific KPIs used in a green financing will vary depending on the nature of the project being financed by the credit facility. The selection of appropriate KPIs should be tailored to the project's environmental objectives and ensure a measurable and verifiable impact. The KPI will then be reviewed by the nominated sustainability adviser quantifying the impact for the purposes of the credit facility. Additionally, green KPIs should be clearly defined, monitored, and reported throughout the loan's lifetime to demonstrate the project's progress and environmental benefits and in a manner that permits the borrower to positively influence the KPIs.

Furthermore, certain green loans may in rarer circumstances also consider social KPIs alongside environmental ones, forming a comprehensive sustainability assessment. These could include aspects like job creation, community development, or improved working conditions, depending on the project's social impact potential. However, these KPIs can be difficult to asses and quantify in a coherent manner for the purposes of the loan documentation.

Denmark: A Leader in Green Finance

Denmark and the Nordic countries have established themselves as leaders in the green finance sector, especially since the renewable energy industry is a key industrial sector in Denmark. Their commitment to sustainability is evident in several key aspects:

  • Subsidy-free competitive market for offshore wind: This showcases Denmark's ability to foster innovation and drive cost-effective solutions in the renewable energy sector.

  • Contribution to climate action: Denmark actively contributes to international efforts, providing significant financial support for developing countries' climate adaptation and green transition initiatives.

Furthermore, dedicated institutions like the Green Finance Institute (GFI Denmark) play a prominent role in mobilising investments, particularly in decarbonising existing buildings and facilities, a critical area for green efforts. One recent example of GFI Denmark's work is a collaboration with pension funds to explore innovative financing models for building renovations that improve energy efficiency.

Denmark also utilises financial instruments like the Kingdom of Denmark's Green Bond Framework, ensuring adherence to international standards and responsible use of funds raised through green bonds. A recent issuance under this framework in 2023 funded the construction of several offshore wind farms in the North Sea, significantly increasing Denmark's renewable energy capacity.

Danish Banks, Corporates, and Green Finance Market Activity in 2023

Green financing is rapidly establishing itself as a new financial product in Denmark. In 2022 alone, Danish banks financed an aggregate of DKK 691 billion green loans. Danish banks have been actively involved in facilitating green finance transactions to Danish renewable energy companies and projects in 2023. Recent transactions include:

  • Ørsted: In 2023, a consortium of Danish banks, including Danske Bank and Nordea, acted as joint lead managers for a EUR 1.2 billion green loan to Ørsted, a leading Danish renewable energy company. The loan proceeds were used to finance the construction of a new offshore wind farm in the German North Sea, further solidifying Ørsted's position as a global leader in clean energy development.

  • Danske Bank: The bank issued its first green bond under the updated Green Finance Framework in January 2023. Furthermore, a second green bond issuance in February 2023, marking the bank's initial entries into the green bond market under the green finance framework. Vestas: A green loan provided to Vestas, a leading Danish wind turbine manufacturer, to support their research and development efforts in next-generation wind turbine technology, which can contribute to increased energy efficiency and overall clean energy production.

  • Ørsted: In 2023, Ørsted became the first company to issue EUR 100 million so-called "Blue Bonds" with a focus on financing initiatives that promote off-shore biodiversity and sustainable shipping.

In addition to the commercial banks, the Danish Green Investment Fund, recenty merged into the Export and Investment Fund of Denmark (EIFO), is a major payer in the Danish financial market and abroad and provides a single point of access for Danish companies as well as for their foreign and domestic business partners for risk-tolerant government capital. The green finance transactions cover the full financial spectrum from capital intensive infrastructure projects, off-shore wind energy farms, to small cap investments in SMEs.

The legal framework for green finance in Denmark

The legal framework for green finance in Denmark is a developing landscape that blends existing regulations with ongoing initiatives:

Existing Regulations:

  • EU regulations: As a member of the European Union, Denmark adheres to relevant EU regulations like the Sustainable Finance Disclosure Regulation (SFDR) and the upcoming Corporate Sustainability Reporting Directive (CSRD). These regulations aim to increase transparency and standardise reporting for companies' sustainability practices, indirectly influencing green finance activities.

  • Danish Financial Statements Act: Expected to be amended in 2024, this Act will implement the CSRD into Danish law, further impacting how companies report on sustainability factors.

Specific Green Finance Initiatives:

  • No specific Green Finance Law: Unlike some countries, Denmark does not have a single, overarching law solely dedicated to green finance. However, the Danish government actively promotes green finance through various initiatives.

  • Green Finance Action Plan (2020): This plan outlined several focus areas like developing a green bond framework, promoting green loans, and fostering knowledge sharing.

  • Kingdom of Denmark's Green Bond Framework: Established in 2022, this framework aligns with international best practices and sets standards for green bond issuances by the Danish government.

  • Financing the Green Transition: The Danish government published its white paper in 2023 outlining its policy on financing the green transitions in terms of mobilising investments to accelerate the green finance market.

Looking ahead, the Danish government and financial regulators are continuously examining and adapting the legal framework to support green finance growth. The EU's development of a taxonomy for sustainable activities is expected to provide a clearer classification system for green investments, influencing Danish regulations, as Denmark has an excellent record in implementing EU legislation and especially given the Danish governments focus on promoting green initiatives on a large scale. While a single, comprehensive Green Finance Law does not currently apply in Denmark, the country's legal framework combines adherence to EU regulations with ongoing initiatives and future considerations, fostering a supportive environment for green finance activities.


Green finance offers a promising new development in terms of financial products that are linked with environmentally focused objectives to provide capital for environmentally friendly projects. As the world grapples with the challenges of climate change and environmental degradation, green finance presents an evolving financial product class for building a more resilient and sustainable future for all. The Kingdom of Denmark is focused on advancing its contributions and the necessary legal and financial infrastructure in this financial sector and it serves as an example of how governments and their financial institutions can collaborate to drive positive environmental change and combine policy objectives with financial products.

Further Information

Kingdom of Denmark Green Bond Framework, December 2021 is available for download:

Download PDF • 5.91MB

Green Loan Principles, LMA, APLAM, LSTA, February 2023 is available for download:

Download PDF • 543KB

For more information on banking and financial regulation law for banking or capital markets transactions in Denmark, please contact Dr. Andreas Tamasauskas or Michael Carsted Rosenberg at Carsted Rosenberg.

This briefing is intended to provide general information on green financing in Denmark It is not intended to provide definitive legal or tax advice. No legal, tax or business decisions should be based solely on its content. The briefing does not necessarily deal with every important topic and is not designed to provide legal or other advice. It shall not be used as a substitute for legal advice and none may be inferred. It is only intended for general information on matters of interest. While we endeavour to represent the information as accurately and correctly as possible, we cannot accept any responsibility for any errors or omissions.


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