India's PFRDA approves Sovereign Green Bonds for pension funds

Tags: Environment

The Pension Fund Regulatory and Development Authority (PFRDA) in India approved the inclusion of Sovereign Green Bonds (SGBs) in pension funds.

An Overview of the News

• These bonds issued by the government will be used to finance projects focused on environmental initiatives.

Significance of PFRDA's investment in Sovereign Green Bonds:

• Advancing Sustainable Projects: The decision to allow pension funds to invest in SGBs facilitates direct allocation of funds to environmentally beneficial projects, thereby contributing to India's sustainable development objectives.

• Environment-friendly pension portfolio: Allowing pension funds to include SGB in their investment portfolio diversifies their holdings and aligns with the growing demand for investments that are socially responsible and environment-friendly.

• Government's commitment to the environment: Issuance of Sovereign Green Bonds reflects the government's commitment to address environmental challenges and promote a green economy.

• Raising awareness about sustainable investing: The inclusion of sovereign green bonds in pension funds can raise awareness among retail investors about the importance of sustainable investing. As a result, it encourages a more informed and socially responsible approach to financial decision making.

Sovereign Green Bond:

• These are bonds issued by governments that are designed to finance projects related to the environment and climate.

• These bonds provide investors with an opportunity to earn returns backed by a government guarantee, thereby adding a sense of security to their investments.

• The main purpose of Sovereign Green Bonds is to finance initiatives and projects that aim to address environmental challenges and promote sustainability.

• Governments issue these bonds specifically to raise money for environmental projects, as a sign of their commitment to tackling climate issues and promoting green initiatives.

• Green bonds are a type of debt security that helps raise capital for projects that have a positive impact on the environment or contribute to climate change mitigation and adaptation efforts.

About Pension Fund Regulatory and Development Authority (PFRDA)

• It is responsible for regulating pensions in India and was established in 2003 under the Ministry of Finance.

• The main objective of PFRDA is to promote old age income security and protect the interests of National Pension System (NPS) subscribers.

• Deepak Mohanty is the chairman of the Pension Fund Regulatory and Development Authority.

National Pension System (NPS) in India:

• It is a defined-contribution pension system which comes under the purview of PFRDA.

• NPS was created under the Indian Trust Act 1882 to effectively manage the assets and funds of the scheme in the best interest of its subscribers.