#SocEnt, Change, economic development, Global Impact Investing, Impact Investing, Public stock exchange, Social businesses, social change, Social consumerism, Social Enterprise, social entrepreneur, Social Entrepreneurship, Social Innovation, social investors, Social Stock Exchange, Social venture funding
Is it time for the stock exchange to go social? As several countries launch their own versions of exchanges where people can buy shares in social businesses with values that align with theirs, one apparent issue lies in the differences between these exchanges. These differences include different definitions of social enterprise, what role they plan in the capital process (a trading mechanism vs. a connector mechanism), how open they are (open to the public vs. open to accredited investors), there degree to which listed social enterprises must be focused on addressing a social issue (is it their primary concern or secondary concern) and more. Many of these differences lie in the lack of universal definitions around social enterprise and the fact that there are no best practices in this arena.
What sort of issues do the stock exchanges face? Per an article in Forbes, “one of the most cited issues is the difficulty in quantifying and standardizing metrics of social impact within and across sectors (i.e. poverty, health, education, environment, etc). Despite the development of standardized tools such as the Global Impact Investing Rating System (GIIRS) and Impact Reporting and Investment Standards (IRIS), impact monitoring and evaluation remain tricky matters. Social stock exchanges also struggle with attracting and retaining appropriate individuals and institutions to invest. They must find investors who are patient, mission-oriented, and focused on positive social or environmental return above or equal to financial return. Finally, while investors want evidence they’re putting their money in high quality investment opportunities with a track record of success, in most cases they won’t get it. The market itself is still young and, at present, there aren’t a ton of social enterprises developed enough for a capital infusion of the size that would take place on a public stock exchange.”
With a young market, uncertain demand, and a need for standardization – there is a lot of room for growth for social stock exchanges. As we continue to push social enterprise to the forefront, we may be able to address these challenges along the way. A key element to addressing investor uncertainty will be finding solutions to sourcing capital and building financial viability while still maintaining a focus on social metrics and having impact at scale.
Additionally, other angles will have to be considered. Is it essential to have a separate marketplace for social venture funding? Should these be integrated into the mainstream stock exchanges? Questions such as these will be great determinants of what direction this movement will take.
There is much to consider and much to determine, as we see the rise of the social stock exchange.