Online portals for socially-minded investors and enterprises
Dismissed by cynics as a plaything for the ultra-rich, social impact investing is nevertheless catching on around the world and specialized national exchanges are now cropping up where social enterprises – both for-profit and not-for-profit – can connect with similarly-minded investors. World-wide, social finance is projected to reach $650 billion by 2020.
As you might expect, the social stock exchanges in the U.S., the U.K., Canada and Singapore are the farthest along, but SSEs are now also emerging in Brazil, South Africa and Kenya.
Currently, the only SSE on which publicly-listed securities are actually traded is Singapore’s Impact Investment Exchange which was launched in 2013 jointly with the Stock Exchange of Mauritius in order to reach African social enterprises and investors as well as Asian. The IIE lists, trades, clears and settles securities issued by social enterprises, impact investing funds and non-profits whose raison d’être is having a positive impact on poor and vulnerable communities.
By contrast, Mission Markets in the U.S., which was launched in 2010, is restricted to private placements and accredited investors. MMX provides investors with offering documents and due diligence reviews and executes transactions through its affiliated broker-dealer. MMX admits companies that have incorporated social responsibility into their business models and is not limited to pure social enterprises. It is reportedly not planning to expand into a public stock exchange because of the costs and regulatory hurdles confronting such a marketplace in the U.S.
The other SSEs are in various stages of transitioning from just match-making websites on which social enterprises and investors can discover one another to transactional exchanges on which they can actually trade in stocks or, in the case of non-profits, bonds.
In the U.K., the Social Stock Exchange was launched in 2013 to showcase companies listed on the London Stock Exchange whose primary mission is social or environmental impact. The SSE currently provides only standardized social impact information on its listed companies, but ultimately intends to list socially-qualified companies trading on other regulated stock exchanges and become a transactional platform.
Canada’s Social Venture Connexion, which was launched in 2013 and is backed by the Ontario government, connects private ventures with institutional investors. The SVX limits it listings to social enterprises, impact investing funds and non-profits that satisfy the widely-accepted B Corporation social and environmental standards. It is also currently focused on Ontario-based private offerings, but eventually expects to become a trading exchange open to the general public.
In addition to the established SSEs, Brazil is forming an Impact Investment Exchange for socially-qualified private companies to complement its existing Bolsa de Valores Sociais for non-profits; South Africa’s Johannesburg Stock Exchange posts Socially Responsible Index scores for its listed companies; and Kenya’s Social Investment Exchange promotes access to funding for Kenyan entities with triple-bottom-line (social+environmental+financial) business models.
The idea behind all of the SSEs is to give investors the opportunity to provide much-needed capital to enterprises with social missions that align with their own. SSEs offer investors the added advantage of standardized and consistent measures of social rates of return and options to exit their social impact investments.