Social Stock Exchanges (SSEs) are a recent trend of trading platforms created to list only social businesses. These exchange platforms allow social businesses to raise capital by attracting investors to invest in (usually) ethical, niche capital markets.
By way of SSEs, investors can buy shares in a social business just like investors would in a traditional stock market with for-profit companies. SSEs are a platform investors can come to find a social enterprise with a mission that suits their preference, given the increasing attention given to ESG (Environmental, Social, and Governance) these days.
The concept of Social Stock Exchanges is also distinct from a traditional charity platform, or even a crowdfunding platform, as a financial return is expected.
The creation of SSEs has been welcomed by non-profit organizations, development agencies, and social entrepreneurs, as well as multilateral financing institutions looking to expand into new sectors.
Countries that have created and are operating Social Stock Exchanges include Canada, the UK, Singapore, South Africa, Brazil, and Kenya. In September 2021, even India approved the creation of an SSE under the ambit of the Securities and Exchange Board of India (SEBI). SEBI is the regulatory agency governing India’s stock exchanges.
That said, each country’s SSE operates differently. The UK’s SSE currently acts as an information provider to the general public, publishing standardized and comparable social impact data on its site. A prerequisite is that all companies must be registered on the London Stock Exchange and pass a social impact test.
SVX is the Canadian platform and probably the closest to a full-fledged stock exchange but is open only to institutional investors and mandates a valuation criteria to publish reports. It is also backed by the Government of Ontario, who provide easy legal registration for social businesses. The Singapore SSE is similar to the Canadian one in terms of criteria.
Over in Africa, SASIX (South African Social Investment Exchange) works exactly like a stock exchange. Kenya Social Investment Exchange (KSIX) began in 2011 to profile social enterprise investment opportunities in country.
What are some of the challenges facing SSEs? The biggest hurdle is still accreditation required across the board — from investors, social businesses, to the brokers and valuation experts in the field.
Also, there isn’t a standard definition of “social businesses” that is universally accepted. For example, in Singapore and South Africa, social businesses must have a primary social purpose, whereas in the UK, social purpose could be a core (but not the primary) aim of any social business. What is generally accepted is that businesses that have a social, environmental or development focus collectively earn the label of “social business”.
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