In a first, Sovereign Green Bond Mutual Funds to be launched. HDFC AMC files for approval. Know more about the fund

HDFC seeks approval for the new Sovereign Green Bond Funds.

Sovereign Green Bond

Mutual fund companies regularly launch new funds to target more customers. HDFC Mutual Fund's Asset Management Company (AMC), HDFC Asset Management Company Limited, recently filed papers with SEBI to launch two new funds.

Per the AMC's filings, it is eyeing to launch India's first-ever mutual fund, which would track Sovereign Green Bonds. Here are some of the details of the proposed new fund:

  • The new funds would be target maturity funds with a fixed maturity date.
  • The funds would be passively managed, and they would track the movement of Sovereign Green Bonds.
  • Two funds will be launched: the HDFC Nifty India Sovereign Green Bond Jan 2028 Index Fund and the HDFC Nifty India Sovereign Green Bond Jan 2033 Index Fund.
  • The funds will be open-ended schemes that aim to track Sovereign Green Bonds' performance.

What are Sovereign Green Bonds?

Sovereign Green Bonds are debt instruments issued by the Indian Government. The funds raised through them are used to fund Government-sponsored projects working towards reducing the economy's carbon footprint.

The concept and framework of Sovereign Green Bonds were first introduced in November 2022, wherein the process of investing in such bonds and the required disclosures were specified. Later, on 25th January 2023, the first Sovereign Green Bond was launched. The Government also stated that the Finance Ministry launched a Green Finance Working Committee. The committee convenes twice yearly to help the Ministry pick projects to finance with the bonds.

The funds raised from the Sovereign Green Bond would be directed to the Consolidated Fund of India, and the eligible projects would be financed from there.

Related - Read more about Sovereign Green Bonds and how they work. 

What should investors do?

The concept of Sovereign Green Bonds is new in the mutual fund industry. They would be the first such funds available for investment. However, they will have a fixed maturity period. The period would reduce as years go by. Depending on your investment horizon, you can invest in such funds.

Being debt funds, they have a low risk profile and offer stable returns. So, they can help you add a debt component to your portfolio for stability in volatile markets.

Related - Know more about target mutual funds and how they work.

Check out this video to know more about Sovereign Green Bonds

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