"Green bonds will enhance the development of New Zealand's sustainable finance market," Finance Minister Grant Robertson said.
"Projects financed by the bonds will be subject to additional scrutiny and, over time, the project selection, evaluation, and reporting requirements will help to ensure high-quality projects with robust environmental outcomes are delivered.
"This is particularly important given the significant amount of investment that will be required by the Government to support the climate transition."
Robertson said there was now a substantial and growing demand for sovereign green bonds, reflecting an increase in the number of investors with a mandate to invest in them.
The step follows recent Government moves to launch a new investment framework so all investments by Crown financial institutions are carbon neutral by 2050, to require KiwiSaver default funds to divest from fossil fuels, and to launch a green investment fund.
This year, New Zealand also became the first country in the world to pass legislation to require all listed companies and large financial institutions to report on their climate-related risks.
"The creation of a green bond programme will add a new financing tool we can use to deliver the low-carbon projects we need to meet our climate targets," Climate Change Minister James Shaw said.
"Right now, at the global climate change negotiations in Glasgow, countries all over the world are making significant commitments to cut emissions.
"Something in the order of 80 per cent of the global economy is now covered by some form of net-zero target.
"To meet these targets and cut emissions in line with what the science requires, capital needs to be directed towards activity that will accelerate the transition to a low-carbon economy. Green bonds will be a crucial part of that."
New Zealand Debt Management at the Treasury is leading work on the green bond programme.
Subject to market conditions and progress of establishment activity, final details of the green bond programme will be announced mid next year, followed by an inaugural issuance in late 2022.
Earlier at the UN summit in Scotland, New Zealand tabled a pledge to cut net emissions to 50 per cent below gross 2005 levels by 2030.
The new target dramatically lifts New Zealand's existing emissions reduction committed, which was set as part of the Paris Agreement in 2015.
That 2015 target was to reduce emissions by an average of 30 per cent from 2005 levels over the 2021-2030 period.
That target used a different methodology however - an apples and apples comparison means the 30 per cent Paris target has now been lifted to a 41 per cent reduction goal.
Emissions today are roughly the same as they were in 2005, so the target will mean significant cuts between now and the end of the decade.
