Keep in mind that our commentary on the fund, as well as its past performance, is not a guarantee of what will happen in the future. It is also not financial advice – you should consider talking to a professional adviser if you're not sure whether an investment is right for you.
These investments are designed to be held for the long term. Like all investments, your money is at risk — investments can go down as well as up, currency fluctuations can affect the value of your investment, and you may not get back the full amount you invest.
How does the fund work?
The Triodos Sterling Bond Impact Fund aims to generate a positive impact on society and the environment, while also delivering a stable income, by investing in a diversified portfolio of bonds.
Unlike shares, bonds are loans made to companies or governments. These loans pay a fixed rate of interest over a set period, offering a regular income. The fund invests in corporate bonds, green and social bonds, and UK government bonds (Gilts), with a focus on higher-impact issuers.
Economic and market context
At the beginning of the year, yields on 10-year government bonds were slowly going down in most developed countries. This changed with the conflict in the Middle East.
After the war began, bond markets didn't move in one clear direction. Instead, bond yields jumped up and down many times as the conflict grew and it became clear there wouldn't be a quick solution. Now, interest rates on 10-year government bonds have gone up significantly in all major economies. Countries in Europe with weaker economies saw even bigger increases in their borrowing costs.
Short-term yields went up even more than long-term. This happened because investors now expect inflation to stay higher for longer, and they think central banks will keep interest rates higher than previously expected.
The market now believes the European Central Bank and the Bank of England will raise interest rates, while any interest rate cuts from the US Federal Reserve that were expected before are now seen as unlikely.
The increase in bond yields was especially large in the UK. This is because UK inflation had only just started to come down after the previous energy crisis, and the conflict in the Middle East has driven new concerns about energy prices.
Performance update
The Triodos Sterling Bond Impact Fund had a challenging first quarter of 2026, with a return of -1.47% before fees. This was 0.37% better than its benchmark . The fund benefitted from holding well-chosen corporate bonds. However, having more corporate bonds and fewer gilts than the benchmark reduced returns overall. Changes in the shape of the interest rate curve didn't affect performance much, but rising yields were the main reason for the negative return, as bond prices move in the opposite direction to yields.
In the broader market, all types of bonds lost value, with corporate bonds doing slightly better than government bonds and gilts. Compared to the previous quarter, yields rose significantly, especially for shorter-term bonds.
Portfolio engagement
During the quarter, we actively engaged with several issuers in our portfolio to drive positive change in their operations and strategies.
We are closely monitoring developments in the UK water industry, particularly around environmental performance, regulatory changes and infrastructure investment needs. While the sector faces challenges, companies the bond invests in are making progress on reducing pollution and improving services. We'll keep talking with them and regulators to support further improvements.
Return
As of 31/03/2026
| 1M | 3M | YTD | 1Y | |
| Triodos Sterling Bond Impact Fund KR-cap | -2.70% | -1.47% | -1.47% | 3.25% |
| Triodos Sterling Bond Impact Fund KR-dis | -2.67% | -1.44% | -1.44% | 3.22% |
| Benchmark | -2.46% | -1.10% | -1.10% | 3.89% |
Calendar year return
| 2025 | 2024 | |
| Triodos Sterling Bond Impact Fund KR-cap | 5.49% | 0.78% |
| Triodos Sterling Bond Impact Fund KR-dis | 5.45% | 0.78% |
| Benchmark | 6.11% | 1.85% |
Benchmark: Bloomberg Barclays UK Gilt 1–5-year Total Return Unhedged GBP index (50%) and the Bloomberg Barclays Sterling Non-Gilts Total Return Value Unhedged GBP index (50%). Returns incorporate the ongoing charges, but do not take into account the impact of the annual service charge on the performance of your investment.
Portfolio changes
A social bond from CADES, a government agency that manages France's social security debt,was added in the first quarter of 2026. In March, we added 2 new names to the portfolio: Eli Lily and Danone (corporate bonds).
Investing glossary of terms
Asset | Anything of value owned by an investor or company. |
Benchmark | A reference point against which the performance of an investment or fund can be compared. |
Bond | A bond is a fixed-income investment where money is lent to companies or governments for a set period of time, in return for regular interest payments. The Triodos Sterling Bond Impact Fund invests in a portfolio of bonds including corporate bonds, green and social bonds, and UK government bonds (gilts), with a focus on higher-impact issuers. |
Dividends | Payments made by a company to its shareholders or a fund to its investors, as a distribution of profits. |
ESG investing | Environmental, Social, and Governance (ESG) investing looks at how companies manage sustainability-related risks and opportunities. Triodos Impact Funds go beyond avoiding harm – instead actively choosing to do good. Read more about the difference between ESG and Impact Investing in our article. |
Exposure | The amount invested in a particular asset, sector, or market. |
Federal reserve | The Federal Reserve is the central bank of the United States of America. It conducts monetary policy, regulates and supervises banks, provides financial services for banks and the federal government, and maintains financial stability. |
Free cash flow | The cash a company generates after accounting for outgoing cash flows to support operations and maintain assets. |
Fund | A fund is a pool of money collected from multiple investors to be invested in a variety of assets. At Triodos, our Impact Funds are managed by Triodos Investment Management who make decisions on behalf of investors. |
Holdings | The individual securities or assets owned within a portfolio or fund. |
Interest rate | The percentage charged or paid for the use of money over a certain period of time. A country's ‘base rate’ is determined by its central bank, this can affect investment returns positively or negatively. |
Small, mid and large cap | This refers to a company’s “market capitalisation” which is a company’s value based on the total price of its outstanding shares. |
Portfolio | The collection of investments held by a fund. |
Valuation | The process of determining the current worth of an asset or company. |
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