This story is the first in a series that will look at how social impact investment products are becoming available to the mainstream financial community.
In a report distributed last month, the World Economic Forum (WEF) discussed the need to bring social impact investing into the mainstream in order for the market to gain some traction. An exchange that opened earlier this year – the Social Stock Exchange (SSE) – is hoping to be a meaningful part of that transition.
Launched in June by founders Pradeep Jethi and Mark Campanale, and announced by British Prime Minister David Cameron, the exchange was designed to use the public financial market structure to connect listed social impact businesses that need capital with socially motivated investors.
We “believe in the power of business to tackle some of today’s biggest social and environmental challenges,” says Pradeep, who spent three years at the London Stock Exchange (LSE) as a new product development manager. “The Social Stock Exchange, and the impetus for founding the platform, is that it is there to provide a unique marketplace designed to connect publicly listed social impact businesses with investors seeking to generate impact alongside a financial return.”
Indeed, according to figures released this month by social and environmental investment firm, Sonen Capital, the growing awareness of impact investment as a practice has resulted in a greater number of investors and entrepreneurs along each point of the impact spectrum with assets managed under sustainable and responsible investing principles growing by approximately 22% from $3.07 trillion in 2010 to $3.74 trillion in 2012.
In the case of the exchange, investors from any country can access the SSE as long as they go through a broker in their home jurisdiction that has a counterparty in the UK. The exchange’s listed companies are not only London-based, although for historical reasons the exchange has more London businesses than international. Exchange founders say they hope to take the organization even more to the international scale down the line.
Investors using the SSE’s services tend to be institutional because of the nature of the investments involved. Individual investors can participate if they go through their independent financial adviser or have their own share dealing account with an investment firm.
All companies on the SSE are already-listed companies, and the SSE aims to provide the investor the information they need to identify and compare those organizations that deliver value to society and the environment through their core products or services.
SSE Built With The Support Of The Rockefeller Foundation
The SSE was founded back in 2007 with the support of the Rockefeller Foundation as part of the foundation’s program to develop global impact investing infrastructure. Early investors for SSE include Big Society Capital, a UK- based social investment bank; Joseph Rowntree Charitable Trust, a philanthropic grant-making trust that chiefly supports work undertaken in the UK, Ireland and South Africa; and social investment foundation Panahpur.
Pradeep says the SSE is “seeking to grow the number of companies [listed] very quickly to ensure an index provider like FTSE or similar can create an index product that retail investors can track and or participate in.” He says the “end-game” is to democratize impact investing to the extent that any investor, individual retail or institutional, can invest in a manner that reflects their values.
Exchange officials report that SSE-listed companies and social impact investors have reacted very positively in the months following the launch of the SSE. No doubt, this has been a big time for early assessment of the social impact market landscape.
One of the latest reports out on the subject includes a document from Big Society Capital, an investor in the SSE. According to the investment bank, at this time the social investment market may be in the “marketplace building” phase of the market.
Just what is being built remains to be seen.
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