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HomeFinance Impact of pension fund investments in sovereign green bonds

 Impact of pension fund investments in sovereign green bonds

In an effort to lower the economy’s carbon intensity, the Government of India (GoI) will issue sovereign green bonds (SGrBs), and the Pension Fund Regulatory and Development Authority (PFRDA) will permit pension fund managers (PFMs) to invest in them. In order to complete its entire market borrowing program, the GoI is anticipated to issue SGrBs in the second half of the current fiscal year.

What are Sovereign green bonds? 

Government-issued bonds used to finance environmental projects are referred to as sovereign green bonds or simply “green bonds.” SGrBs, which are designed exclusively for green initiatives, provide the chance to earn returns that are guaranteed by the sovereign.

Can pension funds achieve greater diversification?

Pension funds can gain greater diversification, distributing risk across a variety of asset classes, and supporting sustainable investments in line with environmental, social, and governance (ESG) principles by integrating these environmentally conscious debt products in their investment portfolios.

Retail investors can now match their pension contributions with their principles, supporting initiatives that advance sustainability, renewable energy, and environmental protection. Retail investors are becoming more aware of the environmental impact of their investments.

Investments in sovereign green bonds are considered safe

Since sovereign green bonds are seen as relatively safe investments with government backing, retail investors who enter this market may profit from less market volatility.

In order to fund public sector initiatives aimed at lowering carbon emissions, the government issued its first Sovereign Green Bonds (SGrBs) in the previous fiscal year, raising $16,000 crore.

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