A Primer on the Concept of Social Stock Exchange

A Primer on the Concept of Social Stock Exchange

Introduction

India’s economic imperative is to feed, clothe, educate and empower more than a billion people in ways that conserve and grow its natural, cultural and social heritage. This cannot be achieved through the efforts of conventional commercial capital alone. By revolutionising the state of play in the social sector, the Social Stock exchange (SSE) is being designed to contribute to India’s social and economic development.

Social Stock Exchange (SSE), created as a separate segment under the existing stock exchange, is a platform where securities or other funding structures are listed and follow procedures for funding selected entities that make and report measurable social impact.

The concept of Social Stock exchange is built on the premise that private sector and non-profit sector can play a significant role in national development outcomes if more funding is made available to them. The three dimensions of education, health and income are used by the Human Development Index to measure a country’s development achievements. India ranks 129 among 189 countries for the year 2019, thus, indicating the need for more funding to the social sector to achieve national development outcomes.

According to a 2020 survey by the Global Impact Investing Network (GIIN), the impact investment market size is $715 billion globally. Social Stock Exchange has the potential to tap this vast pool of funds for social development, growth, innovation, and the creation of a sustainable ecosystem.

While there are many funding channels in India – CSR, Impact investing, Socially Responsible Investing, philanthropy, government agencies, etc., it must be acknowledged that they work to varying degrees of effectiveness. SSE envisages the development of the social sector by enabling diverse funding channels to come together on a common platform with uniform frameworks in reporting, measurement and standards.

While both For Profit Organisations (FPOs) and Not for Profit Organisations (NPOs) operate in different ways and have different financing needs, SSE recognises the unifying elements, the common minimum reporting standards on social impact, governance and financials for both FPOs & NPOs.

The Social Stock Exchange envisages to meet the following needs –
 Help social organizations commercialize their financing so that they can scale up operations and break their dependency on grant funding.
 Demarcate the difference between social and conventional finance by creating a separate marketplace for impact investments.

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