If you haven’t heard of impact investing yet, just wait. It’s one of the hottest areas in investing, and the industry is racing to offer more opportunities for people to put their money into investments that deliver a positive impact on the world, along with positive returns. Think: projects and stocks of companies that are providing clean water or looking to prevent disease.
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This formerly niche corner of investing has become increasingly mainstream, partly because it offers a tantalizing opportunity to target millennial customers. Big-name players are getting involved, such as Morgan Stanley, which has created an Institute for Sustainable Investing and recently raised more than $125 million for a global impact fund. The prominent venture-capital firm Andreessen Horowitz is backing OpenInvest, which matches people with socially responsible investments. All the new entrants are bringing more credibility to the field, but they’ve also coincided with some growing pains.
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Swell, a company backed by the insurance giant Pacific Life, is one of the latest entrants and offers a case study of how keen the industry is to tap into impact investing’s growth. Swell launched last month, but it’s already gone through a couple iterations.
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After its first prototype didn’t attract enough customers, Swell partnered with, of all things, a design company to help in its construction. IDEO is the same firm that designed Apple’s original computer mouse, and it helped Swell develop everything from its web site to its philosophy on hiring.
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The stakes are high.
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Sustainable, responsible and impact investing accounted for $8.7 trillion last year, or $1 of every $5 under professional management, according to US SIF, a trade group. That’s up 33 percent in two years, and it far outpaces the 5 percent growth for U.S.-registered investment companies overall.
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With the recent U.S. pullout from the Paris climate accord, one school of thought says…