In turn the investment will be used to finance green economy projects. The move is significant as it is the first pension fund investment in the IDC, which is something the government — in particular Economic Development Minister Ebrahim Patel — would like to see become a feature of the savings environment.

Mr Patel and recent African National Congress (ANC) policy proposals suggest that pension and other savings funds, in particular those of the Government Employees Pension Fund, should be encouraged to invest in vehicles such as the IDC, which would in turn lend money at concessional rates to help propel economic growth.

The green bond will have a return of about 9% and will be made "at balance sheet level" to the IDC and not through a special purpose vehicle, Government Employees Pension Fund chairman Arthur Moloto said. "The Public Investment Commission is still working on the contracting, but the return we are looking at in simple English would be approximately 9%."

This is consistent with the fund’s policy of responsible investing adopted by its board two years ago, which says that developmental investments must carry a return of inflation plus 3%.

A large part of the fund’s portfolio — 36% — is in government bonds. The return on the IDC bond is benchmarked against these.

The fund’s responsible investment policy also states that 5% of its portfolio be set aside for developmental investments in the areas of: economic infrastructure, social infrastructure, green economy projects and small enterprise or black empowerment initiatives.

Prior to the green bond, the fund had 0,6% of its assets in developmental investments. It said by investing in the bond it would support "the Department of Energy’s independent power producer procurement programme" and "stimulate the renewable energy industry".

Mr Moloto said the fund had both direct and indirect investments in developmental projects. The green bond was an example of an indirect investment, while investments in specific infrastructure projects constituted direct investment.

The new green bond also illustrates what is becoming a trend in the IDC. The state-owned corporation has recently begun to make use of social funds, and since 2009 has taken up two R2bn five-year bond issues from the Unemployment Insurance Fund at 5% interest.

These were used by the IDC to provide funding to companies in distress during the recession at close to cost price.

Mr Patel said recently he envisaged portfolios of investments, or projects, in which funds could invest through the IDC. Products and investments were being conceptualised to make this possible.