In the ever-evolving landscape of philanthropy and social change, the traditional concept of giving has undergone a remarkable transformation. Regardless of the differences in their beliefs, all the faiths in the world also unite in their pursuit of compassion and charity in the name of a ‘daan’, ‘sadaqah’, ‘seva’ et al. In recent times, we have witnessed a transformation from simple donations through ‘daan paatra’ to social bourses. And this is not merely semantic, it represents a paradigmatic change to encompass a more holistic and sustainable vision for social change.
In the era where financial markets are not only the engines of economic growth but also catalysts for social change, the concept of Social Stock Exchanges (SSEs) is gradually reshaping the landscape of investments by prioritizing social and environmental impact alongside financial returns. It will also bring in the much-needed trust and transparency and build the credibility of the social sector among the individual and corporate donors.
Technically, Social Stock Exchanges are specialized trading platforms that list companies and organizations committed to creating positive social and environmental outcomes. By providing a space for impact-driven businesses to raise capital, SSEs bridge the gap between investors seeking financial returns coupled with societal contributions. Alternatively, it is an electronic platform for raising funds for serving society at large by connecting investors who are inclined towards contributing to the good of people and the planet.
Any not-for-profit organization or for-profit social enterprise that has a social intent would be recognized as a Social Enterprise and will be eligible to be registered or listed on the SSE. Currently, the social sector contributes two percent of India’s gross domestic product (GDP).
Being on SSE, would provide the much-needed faith to the contributor that the money is being given to the legitimate organisation for the larger benefit of the society. There are various benefits of SSE.
Firstly, it provides the social enterprises with the much-needed capital which they often find it tough to raise through the traditional funding sources.
Secondly, it will enhance transparency through regular audits of social activities and impact reporting, which will build trust among investors and stakeholders.
Thirdly, the SSEs will help increase the visibility of social enterprises, attracting both retail and institutional investors interested in supporting socially impactful ventures.
Investing through SSEs revolves around the triple-bottom-line approach. Companies listed on SSEs are evaluated based on their environmental, social, and governance (ESG)criteria. By ensuring that their investments contribute to issues like poverty alleviation, education, healthcare, renewable energy, and climate change mitigation, this integrated approach enables investors to make informed decisions that align with their values and beliefs. ESG reporting in India through the Business Responsibility and Sustainability Report (BRSR) captures data points on a vast landscape of organizational activities. BRSR is mandatory for the top 1000 listed companies in India and may be extended to other companies in the future.
The journey from donations to Social Stock Exchanges has witnessed the change of a century. SSEs represent a pivotal evolution in the financial industry, where profit and purpose harmoniously co-exist. They have immense potential to drive the transition toward a more sustainable and responsible global economy. India has the power to swiftly adapt to the new trends considering the pre-existing framework of Corporate Social Responsibility. As SSEs continue to expand and evolve, they play a significant role in making finance a force for good, by transforming the traditional ‘daan-patra’ into an electronic social exchange impacting the lives of the people and the planet.
About the Author: Fatima Naqvi is Partner in Optimyze Finance LLP, an international professional services firm based in UK and India. Both, a Lawyer and a CA, she has an experience in Sustainability audit, ESG reporting, Insurance, and Risk Management and is also the founder of NGO AmrohaSay
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