Triodos Sterling Bond Impact Fund: Investor Update Q3 2025

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 what you put in.

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 

Bond markets continued to face a challenging environment in the third quarter of 2025, shaped by growing concerns over the ability of governments in advanced economies—including the US, France, and the UK—to manage high fiscal deficits amid rising levels of government debt. These fiscal worries contributed to renewed volatility in yields, with the US 10-year Treasury yield ticking higher after briefly declining on the back of weak labour market data.

In Europe, the German 10-year bund remained largely unchanged throughout the quarter. However, yields on both UK and French 10-year government bonds rose, reflecting heightened political uncertainty and increased attention to fiscal deficit issues.

This backdrop created a mixed picture for fixed income markets. While credit segments generally remained resilient, government bond performance diverged as investors weighed the risks of persistent deficits and shifting policy dynamics.

Performance update 

The Triodos Sterling Bond Impact Fund posted a positive return of 0.60% (gross of fees) in Q3, slightly ahead of its benchmark. The fund’s overweight in corporate bonds and underweight in Gilts contributed positively, although its focus on higher quality government-related bonds limited some upside. Overall, all bond segments delivered gains, with corporates outperforming Gilts, and the fund maintained a stable, defensive positioning.

Looking ahead

The outlook for bond markets remains cautious as the economy slows and inflation expectations stay elevated, creating further challenges for fiscal planning. With rising risk premiums and higher borrowing costs, the government will need to focus on fiscal discipline, though achieving a balanced budget will be difficult given warnings from businesses against tax increases. As a result, the responsibility for managing inflation expectations is likely to fall primarily to the Bank of England. We anticipate a prudent monetary policy stance will be required to avoid market stress and prevent further increases in risk premiums.

The fund will continue to invest in high-quality bonds that support a more sustainable and inclusive future, prioritizing companies and institutions aligned with Triodos’ mission of using finance for positive change.

Return

As of 31/10/2025

Calendar year return

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.