Marjan Divjak's leadership in structuring and executing Slovenia's inaugural sustainability-linked bond (SLB) has not only reshaped the country's approach to climate financing but also set an example for sovereign issuers seeking to link capital markets more directly with measurable environmental outcomes.
As director general of the treasury directorate at Slovenia's Ministry of Finance, Divjak says the objective was to introduce a new structure, which was clear and easy to understand, to the sovereign bond market.
Rather than relying on multiple indicators or complex frameworks, Slovenia's €1 billion ($1.15 billion) bond – which has also won the award for Sustainability-linked bond of the year – sovereigns/SSAs – is anchored to a single, highly material key performance indicator (KPI) – total greenhouse gas emissions.
As the first sovereign in Europe to issue an SLB, Slovenia has set a powerful precedent, and the clarity of design has been widely recognised as one of the transaction's defining strengths.
"It is comprehensive, policy-relevant and easy to understand," he tells Environmental Finance. "For us, simplicity was not a compromise on ambition, but a way to strengthen credibility, transparency and accountability."
Featuring a symmetrical step-up and step-down mechanism, the bond directly links financial outcomes to environmental performance – with a 50 basis points (bps) coupon step-up if Slovenia fails to achieve a 35% emissions reduction by 2030, and a 50-bps step-down if it exceeds expectations by reaching a 45% reduction. This dual incentive mechanism is usual among sovereign issuers.
The structure is also in alignment with international best practice, including the International Capital Market Association's Sustainability-Linked Bond Principles, and was reinforced by external review.
Another defining feature is its strategic intent: to ensure that sovereign financing reflects real-world policy commitments, says Divjak.
"Simplicity was not a compromise on ambition, but a way to strengthen credibility, transparency and accountability"
Rather than creating bespoke targets purely for the bond, Slovenia anchored its commitments in its existing National Energy and Climate Plan. This decision ensured that the targets were not only ambitious but also grounded in national policy and backed by scientific methodology.
"Investors and rating agencies could see they were policy-driven," Divjak notes. "Credibility depends on showing that ambition is measurable and realistic."
The result was a transaction that resonated strongly with the market: the deal was 6.5 times oversubscribed.
When reflecting on the replicability of the structure for other sovereigns, Divjak says the most important lesson is to choose KPIs that are "truly material, supported by reliable public data and clearly linked to national policy", adding that strong governance, transparent reporting, and credible verification are essential foundations.
His perspective has been shaped by more than a decade of experience navigating diverse and often challenging market conditions. Now in his 14th year as director general, Divjak points to 2013 as a defining moment, when Slovenia managed to preserve market access during a period of acute financial stress.
"That experience taught me that in sovereign finance, credibility, preparation and investor trust are paramount," he reflects.
The years that followed saw Slovenia undertake an intensive liability management programme, executing multiple cross-currency transactions and refining its approach to risk and funding strategy.
The country also implemented a proactive hedging strategy, locking in favourable rates during a low-yield environment, and regaining a pre-crisis AA credit rating.
Each phase demanded a different set of skills, but together they built a comprehensive, cycle-tested approach to sovereign debt management, he says.
He also acknowledges that the above achievements are not down to individual efforts: "None of this would have been possible without the exceptional team I have the privilege to lead," he says. "Transactions like this are the result of trust, expertise and long-term commitment across a strong public debt management team."
"Use-of-proceeds bonds help finance specific green investments, while KPI-linked bonds strengthen accountability by linking financing to measurable outcomes. Together, they can provide a more complete framework for sovereign sustainable finance"
Alongside this practical experience, Divjak served on the supervisory board of SID Bank – the development and export bank of Slovenia – and works as an external advisor to the International Monetary Fund (IMF), as well as teaching at postgraduate level in quantitative finance. This experience has strengthened the analytical side of his work, he adds.
Looking ahead, Divjak sees the evolution of sovereign sustainable finance as a question of integration rather than replacement. He argues that different instruments – particularly use-of-proceeds bonds and KPI-linked bonds – should be seen as complementary tools within a broader framework.
"Use-of-proceeds bonds help finance specific green investments, while KPI-linked bonds strengthen accountability by linking financing to measurable outcomes. Together, they can provide a more complete framework for sovereign sustainable finance," he adds.
He also highlights the critical role of the financial sector in enabling that transition. Beyond financing already "green" activities, markets must support sectors and companies as they move toward more sustainable models.
"That is where finance can make a real difference," he says. For this to succeed, the principles that underpinned Slovenia's landmark bond – accountability, credible targets, and transparent reporting – must remain central.
