My previous post introduced the concept of steering one’s own investing towards socially-conscious businesses, and how we can financially benefit from those who meet SRI & ESG standards. We benefit from it, but we also help steer the market towards those ends as well through our own investment actions.

Betterment is an excellent place to take your first steps into investing that also allow you to do so in a socially-conscious way. But mostly what this means is that you’re just doing normal investing and removing the bad apples from the lot. You can do so much more though; there are ways to leverage our investing to be proactive and set to achieve a social positive while achieving financial returns, and for that we have to turn to Impact Investing.

Impact Investing:

Like much in this field, Impact Investing is a very broad term that is used for many different things. I would personally define it as simply any financial investment that aims to achieve a social objective first, and a financial return second. This goes beyond socially-conscious investing since this is a proactive step where you as the investor are actively investing into social objectives.

Traditionally, Impact Investing has been a hands-on operation that usually happens outside the equities market. Organizations like the Rockefeller Foundation & Global Partnerships have been major players in Impact Investing, but typically as a financier of social enterprises. In this vein, Impact Investing has been used by large organizations to fund the very projects that have been described in this series: Global Partnerships invests millions of dollars into microfinance institutions, so that they can turn around and lend money in unbanked regions of the world. These Microfinance institutions need backers, just like any other enterprise, but Impact Investors are willing to delay profitable returns for evidence of social impact.

Since this whole operation has primarily been through direct investments, Impact Investing has not gained much public awareness; most of us don’t have millions of dollars set aside to hire a team to do the research into a social enterprise and work out an investment plan. But thankfully, inroads are starting to develop to allow the layman investor to be more intentional about their investments.

I already mentioned one such version of Impact Investing with Zidisha: by setting up a lending account, you literally are doing a form of Impact Investing where you’re investing into entrepreneurs, for which you receive your investment back after the social return has been achieved. But this concept is starting to branch out into the equities markets as well.

Swell Investing:

Swell Investing appears to be the first major online brokerage designed specifically for mainstream Impact Investing, where you can put your money exactly in the social objective of your choosing.

How it works is that Swell Investing provides six thematic portfolios to pick from:

Each of these portfolios are purely made of companies that meet a particular social objective. For instance, with the Renewable Energy portfolio, it is comprised of 65 companies “that derive revenue from products, services, or infrastructure projects supporting the development or delivery of renewable energy and alternative fuels (https://s3-us-west-1.amazonaws.com/swellinvesting/factsheets/Swell-Renewable-Energy-Factsheet.pdf).” Currently 3.69% of the portfolio is of Tesla stock, because Elon Musk’s SolarCity, America’s largest full-service solar provider, is actually a subsidiary of Tesla.

You are provided a full list of all the stocks that are within a portfolio and you will be forwarded news relating to those companies as well, so that you can be more involved with the initiatives you support and the work of the companies that you’re investing in. Along with that, you’re able to see a direct comparison between the portfolio you have compares to the S&P 500 index. This is helpful to see the cost of your socially-minded investing is having, or perhaps to see how comparable your investing is to the general market.

You don’t have to just pick one portfolio of the six, but you can choose how many you want and of how much you would want. For instance, you can decide to have all six, but perhaps you really want to be in Disease Eradication. You could say 50% of your investment goes into Disease Eradication, and the other five categories get 10% each. You have complete liberty to customize the weight of your investment allocation, and to adjust it over time.

Recently, Swell introduced a 7th portfolio: The Swell Impact 400 portfolio. It’s essentially an ETF that they created themselves, and it’s comprised of 400 stocks that all meet at least one objective of the UN’s Sustainable Development Goals.

Sustainable Development Goals

Back in 2000, the UN held a huge convention where they decided they wanted to get the whole world on the same page about tackling humanitarian issues. What came out of the was the Millennium Development Goals, an 8-part set of unified objectives that all nations would work together to achieve by 2015. These objectives included things like: halving the proportion of people in the world who live on less than $1.25/day, & reducing the mortality rate of children under 5 years by 2/3. While much of the objectives weren’t entirely met by 2015, we did see over 1 billion people cross over the extreme poverty line, and child mortality percentage was halved during that time.

In 2015, a new initiative was set in place called the Sustainable Development Goals, and this time the list was expanded to 17 goals. These goals are now more holistic in that they apply to everyone, and not just the least developed countries. In addition, these goals are more intentional about addressing root causes to societal issues in addition to hitting observable metrics.

Swell’s Platform Evaluation

Swell may seem like a more explicit version of Betterment, but these services are much more different than they are alike. Betterment is a Robo-Advisor platform that is fully diversified within the equities market. Swell on the other hand is much more of a specialized broker than a comprehensive service; it is designed to help you achieve your social objectives first, and is not designed for comprehensive diversification. You can diversify within six different market sectors, but much of these stocks are moving in the same direction and there are no means of adding bonds or international equities to balance out the risk aspect of these investments. So it doesn’t hurt to open a Swell account to allow you to direct your investments into social objectives that you are passionate about, but then to use another service to be used as an anchor to your overall investment mix.

In addition to Swell not being adequately diversified for being a comprehensive service, it does have an above-average management fee, with an annual fee of 0.75% (most services are 0.25%—0.50%). The one caveat that balances this out is that since these portfolios are Swell’s own investment mixes, and are not just a compilation of Mutual Funds or ETFs, that means there is not an Expense Ratio fee that cuts into the fund performance, and thus implies that your cost may be closer to even to the Robo-Advisors at the end of the day.

Conclusion:

While Swell isn’t going to be a one-stop comprehensive service that fixes all of your social & financial objectives, it is a great start for the cohabitation of those two entities. Capitalism at its core is about the capacity of the individual; we can leverage that so our individual capacity is aimed not only for our own personal benefit, but for the benefit of others as well that stand in the wake of our decisions. We can be made whole through our actions that lift others up. Investing is still an intimidating subject for most, but this could be a healthy step forward that allows you to put your money towards social objectives that can also provide a personal benefit.

Referral Bonus

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