A London-based Social Stock Exchange (SSE) aims for launch in the second quarter of 2013. It plans to partner with a Recognised Investment Exchange to create an investment exchange authorised and regulated by the Financial Services Authority (FSA) for trading in securities of social enterprises and other social purpose businesses. The SSE team are building the trading platform, the pipeline of companies who wish to list, the market-maker and broker communities, and the community of impact investors and have offices in central London, UK.
The goal is to build a securities exchange that lists social businesses from around the world and attracts capital from individuals, private clients, family offices, foundations and institutional investors who are seeking both a financial and demonstrable social return. The target is to become the premier trading venue for social businesses wishing to raise risk capital and for social impact investors who wish to find global businesses that reflect their values.
The team brings together stock-exchange professionals, investment bankers and asset managers. Its offices are based in London Bridge, London UK. The exchange will be open to a wide range of retail investors, including tax-efficient schemes and personal pensions.
Target sectors for listings are smaller high-growth health, educational and environmental companies and also enterprises seeking to finance social and affordable housing, social transport, green and ethical consumerism, clean-tech, green-tech, waste, water, recycling, regeneration, education, public health, sustainable forestry and organic agriculture. It will also help enterprises that work with large numbers of poor (“base of the pyramid”) to help them build economic activity. It is firming up commitments from companies to list and from investment banks to work in partnership and as advisors.
Co-founder and CEO Pradeep Jethi told African Capital Markets News: “Many of the larger City brokers and law firms are working with us, as are social-impact auditors from the ‘big four’ down to smaller niche organisations.”
The SSE aims to become a deal-aggregation platform with global visibility aimed at impact investors across private wealth managers, family offices, foundations and institutions. Ordinary investors will also be able to pick and invest in SSE-listed social ventures, using traditional stock-broking services. Jethi explained: “The main advantage is that the social enterprise’s shareholder base becomes dominated by impact investors who share the mission of the company as well as its growth and financial prospects. By having an aggregated trading venue of social enterprises with common and high standards of regulation, governance and social reporting, this lowers the cost of search and cost of due diligence for investors and therefore provides the advantage of ultimately lowering the cost of capital for a social enterprise.”
The Social Stock Exchange was initially funded by the Rockefeller Foundation as part of their programme to develop global impact investing infrastructure, which also includes the Global Impact Investing Network (GIIN), BLabs/BCorporations, the IRIS impact metrics taxonomy, and GIIRS (the Global Impact Assessment Ratings System). Partners such as international banks and foundations, including J.P.Morgan, Prudential, Deutsche Bank, Triodos Bank, UBS, Calouste Gulbenkian Foundation, Doen Foundation, Ford Foundation and W.K. Kellogg Foundation, are committed to promote impact investing and have contributed research or direct interventions to stimulate the impact investing marketplace.
The SSE company was registered in 2007 and the earliest work commenced with nef (New Economics Foundation), Community Action Network and Office of the Third Sector (now Office of Civil Society).
It raised £250,000/$500,000 from the Rockefeller Foundation; completed extensive market scoping and testing work in 2008, and did research which showed that social enterprises and social investors were positive to the SSE concept. It continued to build support and networks until 2012 when it raised £2m in a second round of funding from a syndicate of strategic investors to provide the working capital to build, market and launch the exchange and to cover up to 6 years of operating costs.