Pension funds to put money into inexperienced bonds: How it is going to affect retail traders?

Pension Fund Regulatory and Development Authority (PFRDA) has stated that it’ll permit pension funds to put money into sovereign inexperienced bonds (SGrBs). As per a report in PTT, the federal government is anticipated to subject sovereign inexperienced bonds within the second half of the present monetary 12 months.

The resolution by the PFRDA to permit funds to put money into sovereign inexperienced bonds holds vital implications for retail traders, stated Abhijit Roy, CEO, GoldenPi.

What are Sovereign inexperienced bonds? 

Sovereign Green Bonds, also called Green Bonds are government-issued bonds used to fund environment-related initiatives. SGrBs provide a possibility to earn sovereign-guaranteed returns, and are particularly meant for inexperienced initiatives.

Sovereign inexperienced bonds (SGrBs): Pension funds can obtain higher diversification

“By together with these environmentally acutely aware debt devices of their funding portfolios, pension funds can obtain higher diversification, spreading threat throughout varied asset courses and selling sustainable investments aligned with environmental, social, and governance (ESG) ideas,” 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.

Sovereign green bonds (SGrBs) suitable for retail investors’ pension needs

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.

Moreover, the availability of sovereign green bonds in pension funds can raise awareness among retail investors about sustainable investing, encouraging a more informed and socially responsible approach to financial decision-making. 

Sovereign green bonds are considered safe investments 

As retail investors venture into this space, they may benefit from reduced market volatility, as sovereign green bonds are considered relatively safe investments with government backing.”

Last monetary 12 months, the federal government raised ₹16,000 crore from the maiden issuance of Sovereign Green Bonds (SGrBs) for funding public sector initiatives looking for to cut back carbon emissions.

Disclaimer: The views and suggestions made above are these of particular person analysts, and never of Mint. We advise traders to examine with licensed specialists earlier than taking any funding choices.

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Updated: 21 Jul 2023, 12:24 PM IST