Social Stock Exchange


Social Stock Exchange:

A social stock exchange will bring together social enterprises and impact investors on a common platform.

Key Facts:

  • In the Union Budget, Finance Minister Nirmala Sitharaman, announced that the government plans to create a social stock exchange (SSE), a platform on which social enterprises, volunteer groups and welfare organisations will be listed so that they can raise capital.
  • It will be worked under the market regulator SEBI.
  • The proposal has attracted much attention, and social entrepreneurs, among others, have said that the move can have a revolutionary effect on how they tap investors for capital.
  • The proposal would be a radical experiment in a country characterised by stark inequality and rapid economic growth.
  • If created, the exchange could provide new and cheaper sources of financing for social welfare projects, while showcasing India’s independence from foreign aid as it seeks to enhance its position on the world stage.
  • SSEs exist in several countries in various forms but there is no clarity about the Indian version yet on trading, tax benefit transferability and accountability of third parties

What is it?

  • It is a platform that allows investors to buy shares in a social enterprise that has been vetted by the exchange.
  • There are only a few international examples and they follow different models.
  • In London, it acts more as a directory connecting social enterprises with potential investors, while in Canada the SVX is an online platform where even retail investors can invest in funds or companies with social impact.
  • In India, the finance minister said the exchange will come under the ambit of the Securities and Exchange Board of India.
  • Finance Minister mentioned that it will be “an electronic fundraising platform”, but the precise nature of its functioning is unclear so far. 

 

Social Enterprise:

  • A social enterprise is a revenue-generating business.
  • Its primary objective is to achieve a social objective, for example, providing healthcare or clean energy.
  • This in no way means that a social enterprise can’t be highly profitable. In fact, most social enterprises look and operate like traditional businesses.
  • The only catch is that the profit these entities generate is not necessarily used for payouts to stakeholders, but reinvested into their social programmes.
  • A continuous flow of profit helps social enterprises plan and execute long-term programmes, and bring on board the required technology and professionals.
  • Profit, which makes social enterprises sustainable, differentiates them from charities, which too have a social mission but are fully dependent on donations.

 

 

Global Models:

  • Canada: Backed by the Ontario government, the SVX is an online platform that allows investments in Canadian companies and funds that have “a positive social or environmental impact”. Retail investors are also allowed to participate. 
  • UK: The Social Stock Exchange in London functions more as a directory connecting social enterprises and potential investors. Launched in 2013, it only accepts companies that pass its independent assessment on social impact.
  • Kenya: The Kenya Social Investment Exchange, launched in 2011, connects vetted social enterprises with impact investors, both foreign and domestic. A listed social enterprise has to demonstrate social impact as well as financial sustainability beyond the funding period. 
  • Singapore: The Impact Investment Exchange runs a social stock exchange in partnership with the Stock Exchange of Mauritius, which is open to limited accredited investors who want to invest.