Plans to develop a social stock exchange (SSE) in the UK as a means of improving access to finance for social businesses have been given a boost by a GBP 250,000 (US$500,000) grant from the Rockefeller Foundation to support research into the feasibility of establishing an exchange.
Speaking at a media briefing at the Skoll World Forum for Social Entrepreneurship at the end of March, Anthony Bugg-Levine of the Rockefeller Foundation said that the research is taking place in the UK because the UK government has a proactive approach to providing a good policy environment. It is therefore more likely that the SSE will succeed there. If established, however, it will bring in companies from all around the world.
According to Mark Campanale of London Bridge Capital, who is helping to develop the SSE, it will fulfil the need for a bridge between the growing number of investable social enterprises on the one hand and the growing number of investors looking for social and financial returns on the other. Unlike the ordinary Stock Exchange, it will also recognize the social premium and safeguard the ethics of listed social enterprises.
Jamie Hartzell of the Ethical Property Company, also speaking at the press conference, talked of a ‘huge appetite’ for investing in social purpose companies. EPC itself has raise GBP 10 million over the last ten years and has 1,300 shareholders. The hope, he said, is that the SSE will make it easier for social enterprises to raise money, providing the patient capital that will allow them to develop and expand. He also stressed the need for liquidity: it must be possible to sell shares as well as buy them.
Pradeep Jethi, CEO of Social Stock Exchange Ltd and former new product development manager at the London Stock Exchange, who is responsible for developing the SSE, says the grant will fund an extensive research project. This will involve talking to the social enterprise sector and building alliances with key organizations, working with private wealth managers to see if they can be persuaded to bring their clients to the SSE, assessing market interest, looking into the regulatory issues, and examining the potential social impact.
The research is expected to be completed at the end of this year. If all goes well, the SSE will launch and begin trading in 2009, conditional upon receiving regulatory approval.
One thing is clear: the SSE alone will not create a functional market. Apart from anything else, there will need to be a mechanism for deciding what businesses can be listed. They will probably be put forward by nominating advisers, who will be regulated. So a whole ecosystem of advisers, nominators, etc will be needed, of which the social stock exchange is but one vital part.
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