The first step for impact investors, regardless of asset class, is to think about which issues or causes are important to them so that they can craft an investment strategy that's in line with their values.
"If you're looking at traditional corporate bonds, then instead of investing in a company totally based on its credit rating, you can also incorporate ESG [environmental, social and governance] into your screens," said Avi Deutsch, principal at Vodia Capital. "That makes sense for a lot of reasons.
"We think that ESG ratings are a great way to reduce earnings volatility, and there's a growing body of research that directs this."
There's also significant research that shows sustainable investing doesn't mean sacrificing returns. It's possible to invest responsibly and make a profit on your investments. A recent Barclays study found that bond portfolios comprised of investments with high ESG scores outperformed the index, while those with lower scores underperformed.
More from Fixed-Income Strategies:
Protecting your fixed-income investments from inflation
Forgot to take your RMD? How to avoid a penalty
3 advisors on how to build a better portfolio
In addition to third-party ratings, companies themselves have become far more transparent about their practices following demand from both investors and the public at large. Last year 85 percent of companies published a sustainability or corporate responsibility report — up from just 20 percent of companies who did so in 2011, according to the Governance & Accountability Institute. So once investors have narrowed down their universe of industries, they can screen individual companies on granular data while looking for ways to diversify their fixed-income holdings.
Investors who'd prefer to buy bond funds rather than hold individual bonds also have options. The number of funds with ESG criteria has grown by 29 percent per year since 2010.
"As the demand for impact investing grows, especially among mainstream and retail investors, fund managers are starting to develop new products that reach new audiences," said Abhilash Mudaliar, research director at the Global Impact Investing Network. "So we've seen significant growth on the public side, and we expect that to continue going forward."