ESG-conscious investors—those focused on Environmental, Social, and Governance principles—who also want to sidestep equity risk have no shortage of green or sustainable bond ETFs to choose from.

These funds typically select issuers based on sustainability metrics, screening out companies involved in controversial sectors like fossil fuels, tobacco, weapons manufacturing, oil & gas, or thermal coal.

But one common drawback of many ESG bond strategies is their high duration exposure. Duration measures a bond’s sensitivity to changes in interest rates—and many of these ETFs lean toward the intermediate-term range, often with durations of 4–6 years or more.

As investors saw in 2022, when interest rates surged, that kind of exposure can translate into outsized losses, even for funds branded as “safer” or “conservative.”

The good news? You don’t have to retreat to money market funds to protect capital. There are sustainable fixed income options with a much shorter duration profile—like the KraneShares Sustainable Ultra Short Duration Index ETF (Ticker: KCSH).

KCSH is built to pursue capital preservation and steady income with minimal interest rate risk, while maintaining an ESG-integrated framework. Here's how it works.

How KCSH Works

KCSH is a passive ETF that tracks the Solactive ISS Sustainable Select 0-1 Year USD Corporate IG Index—a benchmark made up of U.S. dollar-denominated, investment-grade corporate bonds with maturities of one year or less.

What sets KCSH apart is its ESG-integrated approach to issuer selection. The index includes only those companies on track to reduce their carbon emissions enough to help limit global temperature rise to no more than 1.5°C above pre-industrial levels.

To reinforce that sustainability screen, the index excludes issuers with exposure to fossil fuel production, exploration, or distribution services. That’s based on ownership or revenue thresholds, ensuring the portfolio avoids companies with a material stake in carbon-intensive industries.

In short, KCSH is a short-duration bond strategy designed to reflect climate-aware values while still helping investors navigate uncertain markets with lower risk and monthly distributions.

KCSH Features

For investors building a diversified income portfolio, KCSH can function as a stabilizing anchor, especially during periods of rate or credit spread volatility.

By holding ultra-short corporate credit, the fund is positioned to offer a yield pickup over Treasury bills—while still keeping risk in check with strict maturity and credit quality constraints.

With a duration capped around one year, KCSH is significantly less exposed to interest rate volatility than intermediate- or long-duration bond funds. This is something investors aren't getting compensated for much these days.

With a duration capped around one year, KCSH is significantly less exposed to interest rate volatility than intermediate- or long-duration bond funds. This is something investors aren't getting compensated for much these days.