As the spotlight on investors seeking social investments continues to brighten, the rise of social stock exchanges—places where people can buy shares in social businesses with missions that align with theirs—shouldn’t be all that surprising. In fact, several countries have already launched their own versions of the concept.
While the countries currently swimming around in social stock exchange waters don’t necessarily use the same definition of social enterprise when selecting companies (and let’s be honest, there are an overwhelming number of definitions for “social enterprise”), the common denominator among the trading platforms is that they have earned a place on the global leader board for their efforts in mobilizing private capital for public good. They differ in a number of ways, however, the most notable of which include: (a) the type of activity undertaken (actually facilitating trading or playing more of a matchmaking role); (b) who can invest (the general public or just accredited investors, the latter generally referring to those who meet certain net worth and/or income standards); and (c) the degree to which listed social enterprises must be focused on addressing a social issue (as the reason the venture exists or as a matter of secondary concern). While they differ in form and function, here are the four social trading platforms currently making the most noise around the world:
- U.K. (Social Stock Exchange). In June 2013, the U.K. launched Social Stock Exchange (
SSE ), a platform designed to connect the general public (not just accredited investors) with impact investments. While not an exchange itself, SSE provides information through its website (including standardized and comparable social impact disclosure) on companies that have met SSE’s requirements for membership—all of which must be listed on regulated stock exchanges. SSE currently has 12 companies that pass muster, having demonstrated, among other things, that social or environmental impact is a core aim of the venture. Ultimately, SSE seeks to be an independent platform but has faced many challenges along the way. With considerable backing from the U.K. government, it will be interesting to see the direction SSE takes over the next several years. - Singapore (Impact Exchange). Impact Exchange (IX), strategically launched in June 2013 as a joint initiative with the Stock Exchange of Mauritius (thus capturing audiences in both Africa and Asia), is currently the only public social stock exchange in existence. One catch though – it doesn’t have any social enterprise issuers listed yet. IX plans to have its first class of issuers listed by mid-2014 and, once this happens, extensive information on the companies will appear online (information that is not currently available), which will encourage activity worldwide through broker dealers. In addition to social enterprises and impact investing funds, IX also includes nonprofits in its list of issuers, which can issue debt securities such as bonds. IX requires that its issuers demonstrate primacy of social cause—that is, positive impact on poor and vulnerable communities must be the reason the company was set up in the first place (seemingly a higher standard than the other platforms).
- Canada (Social Venture Connexion). Launched in September 2013, Canada’s Social Venture Connexion (SVX) is an online portal that connects capital-seeking social enterprises and accredited investors. SVX approves issuers (social ventures, impact investing funds, and nonprofits) for membership based on several criteria, including assessing social/environmental impact using the B Corporation standard. Once an investor decides to invest, all transactions are conducted independently from SVX. At present, SVX has 12 social enterprises issuers. While SVX currently only deals with Ontario-based private offerings, it envisions one day being a true exchange open to the general public. In the meantime, SVX gets added social stock exchange street cred for (a) its registered status with the Ontario Securities Commission; and (b) its backing by the Ontario government, which may help catalyze and sustain a larger scale social impact strategy in the long run.
- U.S. (Mission Markets). Mission Markets (MM), launched in 2010, is a private capital (online) marketplace for impact investing in the U.S. Accredited investors registered with MM can log into the site to view approved offerings of social enterprises. MM is a one-stop shop—it connects socially-minded companies to investors, provides review for due diligence and offering documents, brings in the capital, and closes the transactions through its broker dealer partner. MM is a little different for a couple of reasons, though. First, MM has no desire to ever be a public exchange. For MM, the estimated tens of millions of dollars and years of regulatory hurdles it would take to create an independent social stock exchange in the U.S. doesn’t bring in enough bang for its buck. In addition, MM leans away from what many consider “true” social enterprise, as it seeks primarily to support companies in incorporating social responsibility into their business models, rather than remedy entrenched social problems.
In addition to the big four, there are a few other emerging and operating platforms around the globe with related objectives, including Brazil’s Bolsa de Valores Sociais, an initiative intended to boost nonprofits through donations created in 2003 within Brazil’s largest stock exchange (considered by many to be the pioneer of the social stock exchange idea); South Africa’s Johannesburg Stock Exchange, a traditional stock exchange that posts Socially Responsible Index scores since 2004 for listed companies (although this is more geared towards highlighting companies that incorporate socially responsible business practices); and Kenya’s Social Investment Exchange, which launched in 2009 and promotes access to funding for Kenyan entities that incorporate a triple bottom line approach (although it is unclear what, if any, activity is taking place at present). Keep an eye out for Brazil’s second platform, BRIIX (this one for impact investing in for-profits), set to launch sometime in the next couple months!
Nicole Motter, a changemaker at heart with ten years of experience in the nonprofit sector, is currently practicing corporate and securities law in Atlanta, Georgia in an effort to craft a career in social enterprise that can really pack a punch. She can be reached at nicole.motter@gmail.com.
