Pension funds to invest in sovereign green bonds (SGrBs): How it will impact retail investors?

livemint.com:

Pension Fund Regulatory and Development Authority (PFRDA) has said that it will allow pension funds to invest in sovereign green bonds (SGrBs). As per a report in PTT, the government is expected to issue sovereign green bonds in the second half of the current financial year.

The decision by the PFRDA to allow funds to invest in sovereign green bonds holds significant implications for retail investors, said Abhijit Roy, CEO, GoldenPi. Sovereign Green Bonds, also known as Green Bonds are government-issued bonds used to fund environment-related projects.

SGrBs offer an opportunity to earn sovereign-guaranteed returns, and are specifically meant for green projects. “By including these environmentally conscious debt instruments in their investment portfolios, pension funds can achieve greater diversification, spreading risk across various asset classes and promoting sustainable investments aligned with environmental, social, and governance (ESG) principles," said Abhijit Roy.  Retail investors, who are increasingly conscious of the environmental impact of their investments, can now align their pension contributions with their values, supporting projects that promote sustainability, renewable energy, and environmental protection.

With sovereign green bonds typically issued with longer maturities, they offer stability and long-term returns, making them suitable for retail investors' pension needs. According to Abhijit Roy, the inclusion of these bonds in pension funds reflects the growing global trend of focusing on sustainable development and climate change mitigation, providing investors with opportunities to contribute to environmentally responsible initiatives.