The Indian government is considering mandating the Life Insurance Corp of India and sovereign pension fund to invest 1% of their assets under management in bonds issued by state-run power lending firms to finance green projects, two sources said.

The federal power ministry has written to the finance ministry asking that the LIC and Employees' Provident Fund Organisation (EPFO) be mandated to invest in such bonds issued by Power Finance Corp, REC Ltd and Indian Renewable Energy Development Agency (IREDA), according to two government officials who declined to be identified.

LIC and EPFO have combined assets under management of 50 trillion rupees ($604.87 billion). A commitment of billions of dollars in bonds by two of the biggest funds in the country would be key to filling an estimated $3 trillion investment gap in meeting a 2070 goal for net zero emissions.

"The government is working on a proposal seeking investment of 1% of the market value of assets managed by LIC and EPFO in the bonds that would be raised to fund green projects," one of the officials said.