Evaluating Fixed Income

Fixed-income investments are particularly well suited for addressing a wide range of economic disparities in our society. The Domini Impact Bond Fund seeks to help build healthy and vibrant communities by directing capital to where it is needed most.

As with all of our mutual fund investments, our Impact Investment Standards are a fundamental part of our approach to fixed income. We set social and environmental guidelines and objectives for each asset class. For some asset classes, like housing agency bonds, most securities are generally considered eligible for investment. For others, we consider potential investments on a case-by-case basis at the issuer or security level.

When making any fixed-income investment, it is important to ask two questions:

To whom am I loaning my money? And for what purpose?

We then use key performance indicators to determine if the answers to those questions are aligned with our fundamental goals of universal human dignity and ecological sustainability. For corporate bonds, we generally apply the same standards we apply to our evaluation of corporations.

For non-corporate bonds, we focus on three key goals to build a more sustainable and equitable society:

  • Increasing access to capital for those historically underserved by the mainstream financial community
  • Creating public goods for those most in need
  • Filling capital gaps left by current financial practice

These goals stem from our belief that healthy economies must be built on a strong foundation of fairness and opportunity for all.

Why We Invest in Housing Agency Bonds Over U.S. Treasuries

Certain government bonds and various types of debt are excluded from our investments. For example, we have chosen not to invest in U.S. Treasuries or Russian government debt, in order to avoid financing the maintenance of each country’s nuclear weapons arsenal. The United States and Russia possess over 90% of the world’s nuclear warheads. This is not the kind of “leadership” we wish to support through our investments.

Instead of investing in U.S. Treasuries, the Domini Impact Bond Fund invests in U.S. housing agency bonds, an asset class with comparable risk/return characteristics. We consider these bonds directly aligned with our investment goals as they focus on providing access to affordable housing.

When our research team analyzes government debt from other countries, we seek to avoid sovereign debt issued by non-democratic countries; countries with a record of systemic corruption; countries that fail to adequately protect press freedoms; and countries with significant human rights concerns, including human trafficking.

The Domini Impact Bond Fund is not insured and is subject to credit, interest rate, liquidity, and market risks. Investing internationally involves special risks, such as currency fluctuations, social and economic instability, differing securities regulations and accounting standards, limited public information, possible changes in taxation, and periods of illiquidity. Investment return, principal value and yield will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. You may lose money.

This information is provided for educational purposes only, and should not be considered investment advice. The composition of the Funds’ portfolios is subject to change. View the most current list of the Domini Impact Equity Fund, Domini Impact International Equity Fund and Domini Impact Bond Fund's holdings.

The Domini Impact Bond Fund may hold a substantial portion of its assets in the direct obligations of U.S. government agencies and government-sponsored entities, including Fannie Mae and Freddie Mac, and in the mortgage-backed securities of Government National Mortgage Association (Ginnie Mae), Fannie Mae, and Freddie Mac. Ginnie Mae is a wholly owned government corporation that guarantees privately issued securities backed by pools of mortgages insured by the Federal Housing Administration, the Department of Veterans Affairs, and the Department of Agriculture under the Rural Housing Service Program. Fannie Mae and Freddie Mac are government-chartered corporations whose mandate is to enhance liquidity in the secondary mortgage markets. (Ginnie Maes are guaranteed by the full faith and credit of the U.S. Treasury as to the timely payment of principal and interest. Freddie Macs and Fannie Maes are backed by their respective issuer only, and are not guaranteed or insured by the U.S. government or the U.S. Treasury.)

The reduction of withdrawal of historical financial market support activities by the U.S. government and Federal Reserve, or other governments/central banks could negatively impact financial markets generally, and increase market, liquidity and interest rate risks which could adversely affect the Fund’s returns.

During periods of rising interest rates, bond funds can lose value. The Domini Impact Bond Fund currently holds a large percentage of its portfolio in mortgage-backed securities. During periods of falling interest rates, mortgage-backed securities may prepay the principal due, which may lower the Fund’s return by causing it to reinvest at lower interest rates. Some of the Domini Impact Bond Fund's community development investments may be unrated and carry greater credit risks than its other investments.

The social, environmental and governance standards applied to the Domini Funds are subject to change without notice, as is Domini’s analysis of any of the issuers named above.

Check the background of DSIL Investment Services LLC and its investment professionals on FINRA's BrokerCheck. Before investing, consider the Domini Funds’ investment objectives, risks, charges, and expenses. View or order a prospectus. Read it carefully.

DSIL Investment Services LLC (DSILD) distributor, Member FINRA.

Domini Impact Investments LLC (Domini) is the Funds’ investment manager. The Funds are subadvised by unaffiliated entities.

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