SOCIAL STOCK EXCHANGE

Recently, Securities and Exchange Board of India (SEBI) made public the Technical Group (TG) report on Social Stock Exchange (SSE). 

• The proposal to set up SSEs was first floated during the Union Budget in 2019.  

• In September 2019, SEBI constituted a working group (WG) to lay out the modalities for creating an SSE. WG submitted its report in June, 2020. 

• In September 2020, SEBI set up the TG for further advice and clarity on recommendations made by the WG. 

About Social Stock Exchanges (SSE) 

• SSE functions as a regulated funding platform to allow For-Profit Social Enterprises (FPEs) and not-for-profit organisations (NPO) with a social purpose, to raise funds. 

o At present, avenues through which the social sector (FPEs and NPO) receive funding include Corporate Social Responsibility (CSR), impact investing, philanthropic/Government grants etc. 

It brings together social organizations (FPEs and NPO) and impact investors,  

especially institutional investors whereby latter can buy stake in the form of bonds from listed organizations. 

• It provides a mechanism to preserve the social and environmental  mission of the organizations, giving the investors opportunities to mitigate socio-economic problems through investments that also have the potential to produce financial returns. 

• Some of the most prominent SSEs are: UK (Social Stock Exchange), Canada (Social Venture Connexion), South Africa (South African Social Investment Exchange), Singapore (Impact Investment Exchange). 

Why do we need an SSE? 

• Improved market access: An SSE would facilitate a meeting ground between social sector (FPEs and NPO) and investors with inbuilt regulation and will ensure larger visibility of investor and investees. 

• Synergy between investor and investee in social aims: Canvas of choice would be much wider allowing investor and investees with similar visions  and missions to connect seamlessly. 

• Transparency and accountability: Because of rigorous due-diligence and performance metrics that an SSE would be installing for background checks for investors. 

• Performance- based Philanthropy: As performance of the enterprises listed on an SSE would be closely monitored, it will result into better project implementation. 

• Reduced burden on government: SSE would leverage private sector participation in some key areas, engendering a collaborative approach with government in achieving the developmental goals. 

• SSE for COVID-19: A COVID-19 Aid Fund can be set up to activate solutions such as Pay-for success bonds with philanthropic foundations, CSR spenders and impact investors etc.

BY: GURPREET KAUR