As responsible business practices become the norm, the convergence of Environmental, Social, and Governance goals with global development agenda has become essential for corporations. The emphasis now extends beyond minimising local impact to actively fostering measurable community development. With technological advances and growing civil society awareness, businesses have more opportunities to address key development priorities. This will help them create value not only for stakeholders but also for society at large.
The recent introduction of the Social Stock Exchange in India further underlines this shift towards more transparent and effective impact investment. This innovative concept combines financial investments with social impact and has the potential to reshape the investment landscape.
What is Social Stock Exchange?
Social Stock Exchange is a means to channelise capital towards non-profits and businesses that prioritise ESG goals, in response to the growing demand for sustainable and socially responsible investment options.
In India, the SSE was officially announced in the Union Budget of 2019-20, reflecting the government’s commitment to promoting impact investing and fostering social development. It is an electronic fundraising platform under the regulatory ambit of the Securities and Exchange Board of India. SSE will list social enterprises and voluntary organisations so that they can raise capital as equity, debt or as units like a mutual fund.
Since its inception, the Social Stock Exchange has witnessed a steady growth trajectory, with increasing interest from both investors and socially conscious businesses. As awareness about sustainable investing grows, the SSE is expected to play a pivotal role in connecting investors with businesses that share a commitment to social and environmental responsibility.
Benefits for Investors & Non-Profits
For businesses, being listed on the Social Stock Exchange opens doors to a unique pool of investors who prioritise social impact alongside financial returns. This avenue allows companies to attract funding for initiatives that contribute to societal well-being. Moreover, being part of the SSE can enhance a company’s reputation. It signifies a commitment to transparency, accountability, and sustainability – factors increasingly valued by consumers and investors alike.
For non-profits, Social Stock Exchange provides them with the tools and resources needed to advance their missions, increase their impact, and diversify funding.
Transparency
One of the key features of the Social Stock Exchange is its emphasis on transparency and impact measurement. Companies seeking listing are required to adhere to stringent disclosure norms regarding their social and environmental performance. This not only fosters transparency but also enables investors to make informed decisions aligned with their values. The focus on impact measurement ensures that investments lead to tangible social outcomes, reinforcing the SSE’s commitment to creating a meaningful societal impact.
Impact Measurement
Impact measurement is another critical aspect that sets the SSE apart. Companies listed on the SSE are not just evaluated based on financial metrics but also assessed for their social and environmental impact. SSE encourages businesses to adopt standardised impact measurement methods. It ensures that the investments made through the platform lead to tangible and positive social outcomes. This focus on impact measurement aligns with the broader global shift towards measuring success in terms of societal and environmental well-being.
Challenges & Potential
However, if global precedents are anything to go by, the success of the Social Stock Exchange depends on multiple factors. Since the early 2000s, nearly seven social stock exchanges have been established worldwide. Only three of these exchanges—Canada, Singapore, and Jamaica—remain operational. Insufficient awareness and education about the functioning of SSE are some of the reasons behind the closure of the others. Developing standardised metrics for measuring social impact and ensuring regulatory clarity are also foreseeable challenges.
However, these challenges present opportunities for innovation and collaboration. All key stakeholders including government, businesses and non-profits have a crucial role to play here.
Conclusion
The Social Stock Exchange in India represents a groundbreaking development in the realm of finance and social responsibility. As businesses increasingly recognise the importance of aligning profits with purpose, the SSE ushers in a new era. The journey of the Social Stock Exchange in India is not just a financial evolution but a societal revolution.
