Sovereign green bonds are bonds issued by a government or sovereign entity specifically earmarked for financing or re-financing green projects. Green projects contribute to environmental sustainability, such as renewable energy, energy efficiency, water conservation, and climate change mitigation.
India issued its first sovereign green bonds in January 2023, raising INR 80 billion (USD 1 billion). The bonds were oversubscribed more than four times, indicating strong investor interest in this new asset class.
The interest rate on sovereign green bonds in India is typically lower than that on regular government bonds. Green bonds are considered a more sustainable investment, and investors are willing to accept a lower return in exchange for environmental benefits.
There are a few ways to invest in sovereign green bonds in India. One way is to buy them directly from the government or sovereign entity that issued them. Another way is to buy them through a green bond mutual fund. Green bond mutual funds are mutual funds that invest in a diversified portfolio of green bonds.
There are a few different ways to invest in sovereign green bonds.
- Directly from the government or sovereign entity that issued them: This is the most common way to invest in sovereign green bonds. You can buy them through a stockbroker or a bank that offers access to the bond market.
- Through a green bond mutual fund: Green bond mutual funds are a type of mutual fund that invests in a diversified portfolio of green bonds. This is a good option if you want to invest in green bonds but don’t want to pick individual bonds yourself.
- Through a green bond exchange-traded fund (ETF): Green bond ETFs are a type of ETF that invests in a basket of green bonds. This is a good option if you want to invest in green bonds but not in a mutual fund.
To invest in sovereign green bonds directly, you must open a trading account with a broker that offers access to the Indian bond market. Once you have opened an account, you can research sovereign green bonds that are available in the market and place an order to buy them.
To invest in sovereign green bonds through a green bond mutual fund, you will need to open an account with a mutual fund company that offers green bond funds. Once you have opened an account, you can invest in the green bond fund of your choice.
To invest in sovereign green bonds through a green bond ETF, you will need to open an account with a brokerage firm that offers ETFs. Once you have opened an account, you can buy shares of the green bond ETF of your choice.
Here are the steps on how to invest in sovereign green bonds in India:
- Open a trading account with a broker that offers access to the Indian bond market.
- Research sovereign green bonds that are available in the market.
- Decide how much you want to invest.
- Place an order to buy the sovereign green bonds.
Here are some of the best green bond funds in India:
- ICICI Prudential Green Bond Fund invests in a diversified portfolio of green bonds issued by Indian companies and governments.
- Mirae Asset Global Green Bond Fund: This fund invests in a diversified portfolio of green bonds issued by companies and governments worldwide.
- Kotak Mahindra Green Bond Fund invests in a diversified portfolio of green bonds issued by Indian companies and governments.
Green energy bonds are a type of green bond that is specifically used to finance renewable energy projects. Renewable energy projects generate electricity from solar, wind, and hydropower sources.
Green investment in India is a growing trend as investors become more aware of the environmental benefits of green projects. The Indian government has also supported green investment and has set a target of achieving net-zero emissions by 2070.
If you are interested in investing in green bonds or other green investments, many resources are available to help you get started. The Climate Bonds Initiative is a non-profit organization that provides information and resources on green bonds. The Securities and Exchange Board of India (SEBI) is the regulatory body for the Indian securities market and has issued guidelines for green bonds.
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