Social Stock Exchange

Concept of Social Stock Exchange

• First came into existence in the year 2003 when the first social stock exchange was introduced and launched in Brazil, there after many other countries like south Africa Portugal, Canada, Singapore, UK, Jamaica etc but currently 3 are active which is Canada, Singapore, Jamaica
• We have heard about Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) and now new emerging is Social Stock Exchange(SSE)
• SSE can list non-profit organisation (NPO) and For-Profit organisation are required to disclose social impact reports

National Stock Exchange: The Implementor

• NSE received SEBI approval to launch SSE, NSE can launch new platform and can list relevant entities.
• SSE will provide a new avenue for social enterprise to raise funds for social initiatives.
• SSE will bring transparency to fund mobilization and more visibility and can raise donations in simple manner.

Need of SSE

• In the wake of economic downturn brought about by the Covid-19 pandemonic, this was seen as welcome move to ease some of difficulties faced by populace at large for better transparency, accountability, governance for social organizations
• In India there is approx. 31 lacs NPO which is far more than schools and hospitals but funding management is totally unorganized.

Implication of SSE

• There are various instruments available for fund raising like zero coupon zero principal bonds, social venture funds, mutual fund, pay for success models etc
• Social Enterprises have been developing innovative models to address complex social problems.

Benefits of SSE

• Tax benefit and getting contribution from Foreign Contribution Regulation Act (FCRA)
• NPO and FPSE have rigorous regulatory scrutiny
• Social Impact Reporting

Major Component of Social Stock Exchange

1. Social Enterprise

• It includes NPO or for-profit social Enterprises (FPSE)
• Social enterprise has social or environmental cause
• FPSE is generated profit which is backed to social cause
• These enterprises operate like companies and have enterprise orientation

2. Investors/Funders

• it includes social venture capital fund, mutual fund, individual etc
• investment is always for purpose of social cause

 

3. Beneficiary

• Individual or group of Individual who use the services that social enterprise which include NPO and FPSE provide

Key Activities of Social Enterprises

• Eradicating hunger, poverty, malnutrition, and inequality.
• Promoting healthcare
• Promoting education, employability, livelihood
• Promoting gender equality, empowerment of women and LGBTQIA communities
• Ensuring environmental sustainability, addressing climate change
• Protection of national heritage, art and culture
• Training to promote rural sports, nationally recognized sports, paralympic and Olympic sports
• Supporting incubators of social enterprise
• Slum area development, affordable housing to build sustainable and resilient cities
• Disaster management, including relief, rehabilitation, and reconstruction activities
• Promotion of financial inclusion
• Facilitating access to land and property assets for disadvantaged communities.
• Promoting welfare of migrants and displaced persons.
• Bridging the digital divide in internet and mobile phone access, addressing issues of misinformation and data protection.
• Any other area as identified by board or Government of India from time to time.

 

Form of Social Enterprise (legal structure) Trust	Society	Sec 8 Company
Trustee own property on behalf of another person’s	Here collection of people for common charitable purpose or may extend to other field as well	its object the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any other object where profit into furthering the object.
Here 2 trustee minimum is required	Minimum 7 members & J&K(5 members)	Minimum 2 director and 2 shareholders: director also shareholder.
Private trust governed by Indian trust act, 1882 and public trust applied general law except in Gujarat, Maharashtra which have their own state laws	Society registration act 1860 or any other relevant law of concerned state.	Governed under companies act, 2013
Main documents is Trust deed	Main documents is moa and rules & regulations	Main document is moa and aoa
Official of Jurisdictional in state for registration	Registrar or deputy registrar of state	Roc or regional director

Objective of SSE

• SSE will aim at unlocking a large pool of social capital, embedded with financial structure so that conventional capital can partner with social capital to meet the concerns and challenges of the society.
• It will play significant role in delivering essential services to vulnerable and marginalised communities.
• Corporate social responsibility (CSR), impact investment, regular giving is some of key financing sources of India’s social sector
• The major objective of SSE is to obtain transparency and accountability between the funding channels and its utilization prospects.

Role of Information Repositories(IRs)

• IRs is to create and maintain database of active NGO which is reliable, accurate, and timely information, in electronic form, so that it can provide investors with transparent and comparable information.
• It is also called aggregator of information of NGOs, and provide a searchable database in comparable form.
• IRs example is GuideStar India, DARPAN is platform managed by NITI Aayog.
• They are also acting as “feeder” to the SSE by helping players on SSE access additional opportunities to fund high quality NPOs.

Type of Investor

SSE point of view mainly two type of investor, outcome funder interested un creating social impact in the same sector as implementing agency and another category is risk investors.

Investor Funding Structure

• While both NPOs and FPSEs are concerned with social impact, the type of funding avenues is fundamentally different specially nature and legal structure of their “Fund providers”, Specially, FPEs can raise equity while all NPOs cannot.
• Equity is residual claim of owner it means that the owners of an FPSEs can reasonably expect some financial gain but NPOs do not generate profits and therefore cannot issue equity, however here is that Sec 8 companies are allowed to issue equity share but not allowed residual profit like dividend
• ZCZP has been notified under SCRA, 1956 w.e.f July 15, 2022

Social Audit

• Social audit is compulsory for all entities registered under SSE and do audit from social auditor which is registered with a Self-regulatory organization under the institute of chartered accountant of India or such other agency as may be specified by SEBI who hold a valid certificate offered by NISM
• Social auditor will perform impact reporting through independent verification
• Social audit is process of reviewing and verifying the social account at the end of each social account period, it assess how well the company achieves its goals or social responsibility benchmarks
• Social audit is multi perspective

Features of Social Audit

• It is speciality at the impact caused on the society by the organization
• It will be special focus on non-financial stakeholder like other than manager and key person
• It will involve the all stakeholders and adopt a triple bottom line approach

Social Audit Standards

The social audit framework developed by ICAI provides a social auditor guidance for conducting social audit. The social standard is applicable from the date of its hosting on ICAI website

Here is the list of Social Audit Standards(SAS) SAS 100	Eradicating hunger, poverty, malnutrition and inequality
SAS 200	Promoting health care, sanitation, make available safe drinking water
SAS 300	Promoting education, employability, and livelihoods
SAS 400	Promoting gender equality, empowerment of Women and LGBTQIA+ communities
SAS 500	Ensuring environmental sustainability, addressing climate change including mitigation and adaptation, forest, and wildlife conservation
SAS 600	Protection of national heritage, art and culture
SAS 700	Training to promote rural sports, nationally recognised sports, Paralympic sports and Olympic sports
SAS 800	Supporting incubators of social enterprise
SAS 900	Supporting other platforms that strengthen the non profit ecosystem in fundraising and capacity building
SAS 1000	Promoting livelihood for rural and urban poor including enhance income of small and marginal farmers and workers in the non farm sector
SAS 1100	Slum area development, affording housing to build sustainable and resilent cities
SAS 1200	Disaster management, including relief, rehabilitation and reconstruction activities
SAS 1300	Promotion of financial inclusion
SAS 1400	Facilitating access to land and property assets for disadvantaged communities
SAS 1500	Bridging the digital divide in internet and mobile phone access addressing issues of misinformation and data protection
SAS 1600	Promoting welfare of migrants and displaced persons

Theory Of Change

• It is structured and systematic approach to link activities to their impact
• Social change is composite array of cultural, demographic, economic, environment, political, religious, scientific, and technical forces.
• It applies critical thinking to design, implementation, and evaluation of intervention

 

The Chain of Theory of Change Shown below

Input-Activity-Output-Outcome-Impact

It is important aspect of social enterprise which the whole process of social enterprise run, here we discuss case study for better clarification

Problem: Malnutrition and Health Problems Amongst Children

Input: Time and Efforts taken by Doctors & Medical Staff

Activity: Health Camps for children in school

Output: Number of children attended Health Camps

Outcome: Increased Awareness among Children & Parents about

Impact: Improved Health Parameters of Children

This will be future of NPOs and FPSE legal structure for better accountability, transparency and sustainability of social enterprises

Thank You