The Social Stock Exchange building a social capital market Mark Campanale Canterbury Social Banking Summer School July 2011
The Social Stock Exchange
building a social capital market
Mark Campanale
Canterbury Social Banking Summer School
July 2011
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Introduction: the SSE
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Designed to provide global social businesses with access to equity risk capital
Core focus are for-profit social purpose businesses Market aligns capital from mission-aligned investors who
value social outputs alongside profit Market mechanism that provides price discovery as well as
valuation and trading of shares – and, in particular, an entry and exit route for investors’ social investments
Allows intermediaries to create investment products that bring social investors together with social businesses
Enshrines social mission into heart of both the exchange and enterprise
A platform that allows trading of securities in social enterprises on a Financial Services Authority regulated stock exchange
The Social Stock Exchange
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Helping to solve some of the challenges for the impact investing industry
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“It is now beyond urgent that we create a new social financial services sector” Bill Drayton, Ashoka
Rockefeller Foundation funds research into a ‘Social Stock Exchange’
Creating a Social Capital Market
Translation issue – do current markets meet the needs of social enterprises? Search: Can social investors easily find social investments? Regulatory framework: Is it favourable to social investors and social enterprises? Connecting: Is better sign-posting required?
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Grant Venture
philanthropy Patient capital
Bank loan
Quasi equity
Social equity offering
“There is a lot of seed capital available, angel-equivalent, for social entrepreneurs. But there is not a lot of later-stage funding available to take social entrepreneurs to scale. There a huge gap in the social capital market that’s preventing many of the best models from replicating and fulfilling their potential.” Linda Rottenberg, Endeavour Global, (Skoll Foundation/Sustainability 2007)
Addressing the Equity Finance Gap
Social enterprises are likely to require equity finance as they evolve
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Lack of capital routes for expansion or exit?
The challenge for the sector
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Why will a Social Stock Exchange help?
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1. Improve visibility of social businesses – reduces cost of search
2. Provides daily mark-to-market pricing allowing portfolio management and chances for liquidity
3. Lowers financial and management due diligence costs – regulated financial disclosures and adherence to City Codes
4. Lowers social due diligence costs – adoption of social impact standards
5. Facilitates “impact investing” for family offices and foundations
6. Permits easier and targeted coverage by equity analysts interested in the sector, driving down transactions costs for all – including corporate brokers, market-makers and social impact investors
Improve visibility of deals for impact investors
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Democratising impact investing
1. Impact investing need not be the preserve of private equity or professional investors via private equity funds (which dominate the sector)
2. Regulated public stock market allows for retail investors to participate in impact investing: both HNWI and “Joe Public” together
3. RIE status allows pension funds to conduct impact investing 4. Third Sector workers can invest via their occupational (and/
or private) pensions in Third Sector companies 5. Immediate liquidity and daily mark-to-market pricing allows
mutual funds and pension accounts to be created for sale to the general public
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1. Promotes recognised standards that establish a business as being a social enterprise: BCorps, member of SEC, SE Mark, CIC status, IPS, L3Cs
2. Promotes social impact performance and measures using standard, approved models: UKSROI, GIIRS / IRIS, NPC
3. Promotes ‘capacity-building intermediaries’:
social investment banks social equity research and ratings agencies bespoke corporate advisory investment readiness services for the sector
4. Stimulates Government changes to policy and practice towards the sector (taxation, procurement, etc)
Fertilizing the sector’s ecosystem
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Businesses likely to gain access to a
Social Stock Exchange
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A robust principles-led admissions criteria has been developed that involves:
Social businesses demonstrate address key social impact An issuer’s sponsorship on the exchange by a Social Nominated Advisor - NOMAD A social audit as an addendum to the Prospectus Vetting by an admissions panel Ongoing disclosure obligations relating to the issuer’s social impacts Social Key Performance Indicators (KPI’s).
SSE: Admissions Summary
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The Social Stock Exchange: a capital market that supports the social business sector
Social Stock Exchange
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Deliver an FSA regulated and duly authorised investment market place
Explicitly reflect the social mission of enterprises, whilst being comfortable to the needs of investors
Signpost social investors to social enterprises, enabling equity capital to be raised
Capital market that serves the sector
Summary of objectives
The Social Stock Exchange
Contacts:
Mark Campanale [email protected] Pradeep Jethi [email protected] James Perry [email protected]