Investing in Change: The Role of India’s Social Stock Exchange
Meet Changemaker Aadi Juthani (Dhirubhai Ambani International School, Mumbai), who is on a mission to bridge the financial divide in India! Recognizing the struggles faced by families, especially women in rural areas, and NGOs lacking consistent funding, Aadi is tackling these issues head-on. Aadi delved into the world of impact investing, researching the Social Stock Exchange (SSE). His meticulously researched article sheds light on the SSE’s success stories and future potential, providing parents (the target audience) with a clear picture of the SSE’s benefits, risks, and investment process. Keep reading to learn more and gain a fresh perspective on change!
What comes to your mind when you hear the word “investing”? Probably financial returns or making a lot of money, but what if I told you that investing could also refer to “social good”? This is where impact investing comes in, creating an opportunity for social or environmental returns. It aims to redefine the purpose of investing to holistically include meaningful social change. Therefore, to quantify social change, a Social Return on Investment (SROI) measures the value a company creates for its community through the investment it receives, providing a tangible metric for social change and ensuring that investments contribute to sustainable development.
Inspired by the success of Brazil’s Social Stock Exchange (BVS&A) launched in 2003, India has established its own Social Stock Exchange to truly revolutionise the social sector.
What is the Indian Social Stock Exchange?
It is an initiative by SEBI (Securities and Exchange Board of India), which creates a platform that connects investors with social enterprises. Similar to a traditional stock exchange, NPOs (Not-for-Profit Organizations) and FPOs (for-profit companies) with a primary goal of positive social impact get listed on the SSE, where they have a nationwide accessibility of philanthropic funds from HNIs (High Net worth Individuals), institutions and retail participation.
Why choose to invest in the SSE?
If you have been interested in putting your money to good use, there are a lot of reasons why the Social Stock Exchange could be your answer.
Concerned about the legitimacy of NGOs? Every NGO listed on the SSE has met strict criteria and undergone rigorous audits. They are also required to provide periodic financial reports, ensuring their legitimacy and that your funds are used as intended.
Worried about seeing the impact of your investment? The SSE promotes transparency and accountability through Social Return on Investment (SROI) reports. These reports allow you to track the tangible impact your investment is making on social projects.
Unsure about the safety of this new platform? The SSE is backed by SEBI and hosted on the robust framework of the National Stock Exchange (NSE), providing a secure and reliable platform for both investors and NGOs.
By addressing these concerns, the SSE offers an iron-clad arrangement that ensures your investment is both impactful and secure.
How to invest in the Social Stock Exchange?
You might think that such a large project would make it difficult to donate, but in fact, all you need is your demat account, which you probably already have. Since SSEs in India are a segment of commercial stock exchanges, they can use the readily available infrastructure of these exchanges. The securities bought on the SSE will be stored on your demat account. The most common instrument used is the ZCZP tool. Zero Coupon Zero Principal is essentially an instrument with no returns or repayment, however, you are basically guaranteed a social return (SROI). Do note that the tax benefits will likely be available for investments via SSE. However, these rules are not yet defined and the tax benefits under section 80G or 80GGA are currently unavailable. In order to increase retail participation, however, the minimum investment amount has been reduced from 2 Lakh to ₹10,000.
A Case Study: Educate Girls
One of the first NPOs to list on the NSE under SSE, Educate Girls, has seen tremendous success. An NGO that was heavily reliant on individual donations, CSRs, and Institutions has now raised over ₹1.3 Crore through the ZCZP Bond. The organisation, which focuses on improving education for girls in rural India, has been aided by the funds to expand its programs and reach more communities.
Personal Experience and Insights
Through my program with TribesforGOOD, I have gained firsthand experience working closely with an expert in the field of impact investing. Additionally, after thorough research and developing a comprehensive presentation, I pitched the idea of the Social Stock Exchange to NGO Chaitanya Kul’s Founder Satyam Shrivastav. Engaging in this pitch allowed me to understand the perspective of NGOs and the potential hurdles they face when considering new funding options like the SSE.
Witnessing the positive reception from NGOs like ChaitanyaKul has reinforced my belief that the SSE can revolutionise how social enterprises secure funding
Conclusively, I personally believe that the SSE will be a game-changer in the fundraising space for NGOs in India. The possible introduction of CSR (Corporate Social Responsibility) funds, a lot of which go wasted year on year, to be directly invested into the SSE would ensure a much more efficient allocation of funds nationwide.
“In India, I wouldn’t say our population lacks empathy, they lack credible opportunities to express empathy”
Dr. R. Balasubramian (Chairperson, SEBI)
This quote perfectly sums up the application of SSE in our modern-day society, by providing a fantastic and reliable avenue to express empathy. I hope that one day, the people who compare the value of assets, the number of cars, or fancy clothes as a measure of societal status value themselves instead through who has made the greatest difference to society.
Want to broaden your perspective on social impact in India? Check out our blog that publishes Changemaker stories and perspectives on a weekly basis! https://tribesforgood.com/blog
