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 Denmark will issue its first green bond early next year to help finance its transition towards carbon neutrality and a sustainable economy, the Danish central bank said on Wednesday.

Triple-A rated Denmark, which has been at the forefront of the development of wind power, has been looking at ways to fund its green transition, which includes reducing greenhouse gas emissions by 70% by 2030 compared to 1990 levels.

Denmark's central bank said the 10-year green bond will be issued on Jan. 19, 2022, with a coupon of 0.00% and a maturity on Nov. 15, 2031, contingent on stable market conditions.

"With a green bond, the Danish government offers a product that is in high demand among investors and that can support a broad and well-diversified investor base," deputy central bank governor Signe Krogstrup said in a statement.

The debt, which is earmarked for green investments, would align itself closely to the European Union's sustainable finance taxonomy, a list of economic activities and criteria they must meet to be labelled as sustainable investments.

"That is what investors are looking for. They want green investments, which are within the taxonomy, and they get that here," Danske Bank chief analyst Arne Rasmussen told Reuters.

The exact volume of the so-called 'twin bond', issued with the same characteristics as the country's conventional 10-year benchmark bond, will be announced later in December.

However, the country's finance ministry said it would cover government expenses of 10-12 billion Danish crowns ($1.52 billion-$1.82 billion) in 2022.

"It's a relatively modest amount, but large enough to be something that interests investors," Rasmussen said.

"There is a limited selection of government bonds with a triple-A-rating, I am confident it will become popular."

Denmark's largest commercial pension fund, PFA, which manages more than 600 billion Danish crowns, called Denmark's move "attractive". "It is definitely an investment opportunity we want to take advantage of," PFA's head of sustainable investments, Christian Schubart, told Reuters.

The twin bond concept, which Germany also launched last year, means an investor can switch the green bond for the more liquid conventional bond at any time, but not vice-versa. (Reuters)