Bonds seem designed to make investors’ eyes glaze over. Yields, maturities and credit ratings are not the stuff of cocktail-party conversation. But a fast-growing category of fixed-income investments promises to change that, transforming stodgy bonds into a vehicle for corporate governance, social and environmental change.
These “sustainable” bond funds include broadly diversified index funds that buy bonds from issuers with solid environmental, social and governance (ESG) practices; actively managed funds that engage with corporate and municipal issuers to fund ESG-related projects; and more specialized offerings, such as funds that buy environmentally focused “green” bonds.
The number of sustainable bond funds has grown quickly as investors recognize the potential credit implications of climate change, product safety and other ESG risks. There were 58 taxable sustainable bond funds at the end of 2018, up from 34 a year earlier, according to investment research firm Morningstar, and they cover the fixed-income waterfront from ultra-short-term to emerging markets bonds.
Read more at Kiplinger