Sovereign Green Bonds

NEWS: Pension funds to invest in sovereign green bonds: How will it impact NPS subscribers?

About Sovereign Green Bonds

• Pension Fund Regulatory and Development Authority (PFRDA) Chairman Deepak Mohanty on Tuesday said the regulator will allow pension funds to invest in sovereign green bonds. 
• The government is expected to issue in the second half of the current financial year as part of the overall market borrowing programme. 
• Currently, there are 10 pension fund managers under the National Pension System, and the move aims to encourage investment in environmentally friendly projects.

 What are Sovereign Green Bonds ?

• It is government-issued bonds used to fund projects that have positive environmental impacts and contribute to sustainability goals.
• Investors in these bonds do not bear project-related risks.
• It was announced in the Union Budget 2022-23 and the framework for SGrBs was issued by the Ministry of Finance in 2022.
• Last year, the government raised Rs 16,000 crore from the issuance of this to fund projects aimed at reducing carbon emissions. 

PFRDA

• Pension Fund Regulatory and Development Authority is statutory organization founded in 2003 with its Headquarters in New Delhi.  
• It is the regulatory body for the overall supervision and regulation of pensions in India. It operates under the jurisdiction of the Ministry of Finance.

Read about other kinds of Bonds :- CLICK HERE

Practice Questions for Prelims

With reference to Green Bonds, consider the following statements:
1. They are used to fund environmental friendly projects charging a lower interest rate than regular bonds.
2. The aim of the bond is to encourage companies to invest in green projects
3. The IMF was the first institution to issue green bonds

Which of the above statements are correct?
a) 1 and 3 only
b) 2 and 3 only
c) 1 and 2 only
d) 1, 2 and 3

Ans. c

Mains Practice Question

Describe Green Bonds. How might they serve as a doorway for environmentally sustainable investment in the nation? Talk about the benefits and drawbacks.

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