Swell, a do-good investing app with $33 million in assets, is shutting down

Swell Investing

Dave Fanger, the chief executive officer of Swell, which announced its closure this week.

• Swell, a two-year-old Santa Monica, California-based investing app focused on environmental, social, and corporate governance (ESG) investing, said on Wednesday it was shutting down.
• The company said it would close any account with a $0 or negative balance, and that investors could log in through August 30 to access their accounts.
• Swell's closure underscores challenges that impact investing-focused firms and products face in trying to effect change while making clients money - while aiming to prove ESG is more than a marketing gimmick.
• Visit Business Insider's homepage for more stories.

Swell, an investing app focused on so-called environmental, social, and corporate governance offerings, said on Wednesday it was shutting down and would close accounts with a $0 or negative balance.

"While we're incredibly proud of what we've accomplished together, Swell was not able to achieve the scale needed to sustain operations in the current market," the company said on its website. "As a result, we will be closing."

The closure two years after the app's launch narrows the field for new millennial- and Generation Z-focused ESG investing services. John Hancock debuted COIN, a product similar to Swell, earlier this year.

Read more: 2 fintech startups want to help new investors do good with their money, but it's not clear if their dollars will make a difference

Swell said customers could still access their accounts through August 30, and that investors would not "lose money solely as a result of this change."

In April the company had 43 employees and just over 14,000 clients and $33 million in assets, according to a filing with the Securities and Exchange Commission.

Socially conscious investors are pouring capital into funds, though there is no one consistent standard for ESG qualifications.

For example, last month the index provider S&P Dow Jones Indices said it would remove Facebook from its S&P 500 ESG Index as a direct result of privacy concerns surrounding the company, including a "lack of transparency."

Flows into US sustainable open-end and exchange-traded funds are tracking to set a record this year, according to Morningstar.

Sustainable funds have drawn about $8.9 billion in net flows in the first half of 2019, Jon Hale, Morningstar's head of sustainability research, said in a report earlier this month. That's compared to flows of $5.5 billion in 2018.

Now read: Billions of dollars are pouring into Saudi Arabia as investing in the kingdom becomes easier than ever. That has Wall Street grappling with a major ethical dilemma.

"Flows into sustainable funds have set calendar-year records for each of the past three years and appear headed for a fourth," Hale wrote in the report.

Young investors and consumers are increasingly focused on putting their money to work in companies that align with their values, experts say.

"Gen-Z consumers see ESG as a priority like no generation before, with the perceived morals of a firm increasingly influencing consumers' purchasing decisions," James Pomeroy, a global economist with HSBC, wrote Thursday in a report.

Meghan Morris contributed reporting.

Do you have a story to share about Swell? Contact this reporter at rungarino@businessinsider.com.