The fund tracks the Bloomberg MSCI U.S. Corporate SRI Select Index and invests in US dollar-denominated investment-grade corporate bonds with maturities of one year or more. It applies strict screening that excludes socially controversial industries such as alcohol, tobacco, gambling and weapons.

It suits investors who want to reflect environmental and social values in their portfolios while earning stable income through high-quality corporate bonds.

Vanguard launched it in 2020 as a passively managed (index-tracking) ETF.

Using MSCI's ESG research data, the fund excludes bonds issued by companies engaged in controversial businesses or with weak governance. Through a sampling approach, it replicates the risk characteristics of the index while diversifying across thousands of bonds to manage credit risk.

• Strict ESG screening criteria applied
• Vanguard's characteristically very low management fees

Assets under management (AUM) stand at $1.2B, and the expense ratio is 0.12% per year.

Because the portfolio consists only of bonds from high-quality companies that act responsibly, it can reduce long-term governance risk while still offering an interest yield similar to that of a standard corporate bond index.

Bond prices have fluctuated with the interest rate cycle, but the fund has demonstrated asset resilience thanks to the stable interest-paying capacity that is characteristic of investment-grade corporate bonds. The yield curve continues to move sensitively in response to changes in the macroeconomic environment.

As sustainable investing becomes mainstream, capital inflows into ESG bond funds continue, and demand remains steady, particularly from institutions and individual investors seeking to practice social responsibility at low cost.

The fund offers both risk management through ESG criteria and the stability of investment-grade corporate bonds, but during periods of rising interest rates, falling bond prices create a risk of principal loss.

LQD, shown in the table, is the standard product for the US corporate bond market, and USIG also invests in a broad range of investment-grade bonds. If you want the higher yields of high-yield bonds, HYG or SPHY could be alternatives. Meanwhile, SUSC is a similar ESG bond product, and if you want investments broken down by maturity, VCSH, VCIT and VCLT are also worth considering.

Investing with environmental and social considerations is no longer optional but essential. In corporate bond investing too, considering a company's sustainability is a shortcut to securing long-term stability.

Depending on the results of ESG screening, the weights of the energy or financial sectors may differ from those of a standard index, and investors should be aware that this can lead to relative underperformance versus the index in certain economic phases.

It is an efficient bond investing solution for those who want to go beyond value-driven consumption and practice value investing. Backed by Vanguard's reputation and low costs, investors can build stable income while investing in a sustainable future.