Pacific Life Insurance’s impact investing platform Swell, which sought to align offerings with the U.N. Sustainability Goals, said this week it would shut the service by August 30 because it didn’t “achieve the necessary scale.”
The closure comes amid wider growth in social impact investing, which is estimated to have reached $17 trillion in assets.
In a surprise email to customers Wednesday, Swell said it “was not able to achieve the necessary scale in the current market to sustain operations.” The company declined to elaborate beyond the statement when contacted. Its website instructs customers on what to do next.
Swell launched in 2015 with $30 million in backing from Pacific Life. Structured as a subsidiary of Folio Investments, Swell offered customers investment in its pre-curated portfolios aligned to several of the UN Sustainable Development Goals.
Swell had been among the most well-known retail impact investing tools thanks to a large marketing budget that included public transit advertisements in major cities.
Swell had $35 million in assets under management and 15,000 clients, or about $2,333 in each account, Bloomberg News reported. With a 75 basis point annual management fee, Swell was pulling in less than $20 per account on average, Bloomberg also said.
“I think they did a great job of spreading the word on sustainable investing and the ideas behind it,” said Mik Breiterman-Loader, the founder and CEO of Vestive, another impact investing platform. Breiterman-Loader noted that Vestive, which launched in March, has relied primarily on referrals and organic search to fuel its growth.
Swell leaves a still-crowded field catering to a potentially massive audience: the retail impact investing market is estimated to include 75 million people with $17 trillion in investable assets, according to a Rockefeller Foundation study released earlier this year — and ESG funds have already attracted a record $8.9 billion in the first half of 2019.
“There’s a pretty significant groundswell of support for impact and ESG products among the general population, but especially the younger generation as they come into managed family wealth,” said Jeff Schlapinski, senior director of research for the Emerging Markets Private Equity Association. “I don’t think you can look at the challenges faced by any one product or organization and read too much into it, given the board base of support we’ve seen.”
The Rockefeller Study also found that of the retail investors aware of impact investing, 78% were engaged in it already and 55% planned to increase their allocations to impact investing funds or products. This suggests that many retail investors are looking to integrate impact investments into their existing portfolios, not invest exclusively in impact investment portfolios like those offered by Swell.
Traditional robo-advisors like Betterment and Wealthsimple are now incorporating socially responsible investment options into their offerings, as are the more Swell-like platforms Ellevest and ex-Swell partner Motif, which offer pre-curated portfolios that are not all impact investments.
It remains to be seen whether Swell’s customers will flock to impact-only competitors like Vestive, Earthfolio, OpenInvest, and COIN, or opt for socially responsible investment offerings from the more traditional platforms.
For financial advisors and institutions, the impact investing market shows no signs of slowing down. Earlier this week Ethic reported a $13 million Series A raise for its asset management platform; OpenInvest had previously launched its Optimus platform for advisors in May.
