HDFC Mutual Fund files for India’s first Sovereign Green Bond MF

HDFC Asset Management Co. Ltd., investment manager of HDFC Mutual Fund (HDFC MF), has filed for India’s first target maturity funds tracking Sovereign Green Bonds (SGrBs) - HDFC Nifty India Sovereign Green Bond Jan 2028 Index Fund and HDFC Nifty India Sovereign Green Bond Jan 2033 Index Fund. SGrBs are bonds issued by the Government of India (GoI), whose proceeds will be deployed in public sector projects which help in reducing the carbon intensity of the economy.

HDFC MF is seeking to combine a method of financing – Sovereign Green Bonds, with an innovative debt product – Target Maturity Funds.

The launch of these schemes will expand the suite of HDFC MF Index Solutions, and allow a wide audience of investors to invest in Sovereign Green Bonds and contribute towards a greener planet, Sebi said in a circular.

The Government of India issued its first Sovereign Green Bond on January 25, 2023. Proceeds of SGrBs will be deployed in public sector projects which help reduce the carbon intensity of the economy. Examples of such projects include those in renewable energy, clean transportation, green buildings, sustainable water and waste management, pollution prevention and control etc, it said.

Projects related to nuclear power, alcohol, gaming, weapons, tobacco etc. are not eligible. Investors in SGrBs issued by the Government of India do not bear any project related risks. In this manner, SGrBs are similar to regular G-Secs in that they have practically nil default risk since they are backed by the Government of India. Moreover, the yields of SGrBs are currently broadly similar to those of regular G-Secs.

Thus, ESG-conscious investors who want their savings to be utilized to improve the environment and address climate change can consider investing in SGrBs. Investing in Green Bonds is widespread globally, with the size of the global Green Bond market at ~$2 trillion. This global trend could catch on in India, particularly among millennials, as environmentally-conscious investing can align with their core values.