Social Stock Exchange: Paving the way for Impact Investments in India

Social Stock Exchange: Paving the way for Impact Investments in India

Author: Saksham Grover,
Delhi Metropolitan Education, GGSIP University.

Social Stock Exchange
Social Stock Exchange


The focus of the private sector all around the world on the overall well-being of the society and environment is increasing. The market is shifting towards a revolutionized social pattern to achieve the goals of sustainable economic development, with an emphasis on the preservation of human and natural capital. This approach has opened up the doors for dimensions such as Impact Investing, Social Businesses and Social Stock Exchanges (“SSEs”).
Impact investing can be defined as “investments made into companies or organizations with the intent to contribute to measurable positive social or environmental impact, alongside financial returns.”[i] Unlike mainstream investment, an impact investor aims to achieve a positive social and environmental effect in addition to financial returns on investment. Impact Investors are increasingly looking for opportunities that are in consonance with the International norms set out for such social, economic and environmental preservation. With an increasing number of millennials and women investors, who would control a greater proportion of wealth in the coming years, the concept of impact investment would be a great opportunity.


On July 5, Finance Minister Nirmala Sitharaman presented the Union Budget for 2019-20. Among the various reforms majorly aimed at the transport, education and infrastructure sectors, one of the initiatives announced was the creation of a Social Stock Exchange in India.
Social Stock Exchanges are the trading platform which enables a social business entity to raise capital by attracting ethical investors willing to invest in entities which aims to achieve dual objects of corporate and social responsibility. This proposal will act as a crowd-funding platform for raising funds by the non-profit entities and would act as a facilitator between impact investors and social enterprises.
Some advantages of SSEs are:
·       The increased transparency in fundraising can attract impact investors to make an informed decision while assisting a preferred social cause.
·       Various Social Business Enterprises (“SBEs”) can raise capital which would help them to grow and flourish.
·       Listing of these SBEs on the stock exchange would act as a threshold and create a sense of accountability among the enterprises.
·       The creation of SSEs can also assist in regulating the social finance sector, which presently does not have specific legislation in India.


·       The Social Stock Exchange, United Kingdom (“SSX”): This exchange, opened in 2013 serves as a catalogue of companies that have passed the “impact test.” It does not per se act as a trading platform but instead, is a research service for the potential social impact investors.
·       Social Venture Connexion, Canada: Opened in September 2013, it acts as a private investment platform to provide social businesses with access to impact investors, service providers, etc.
·       The Impact Exchange, Singapore: This is the only public Social Stock Exchange. Like the UK SSX, it aims to provide a platform to facilitate information about valued impact investors and social businesses. It also includes not-for-profit entities in its list of issuers which can issue debt securities.
·       The South African Social Investment Exchange (SASIX): It was the second SSE globally and provides an online platform where anybody can invest in social development projects. SASIX works like a traditional social stock exchange and attracts many ethical investors.


Every enterprise, from an energy company to social housing funds, investors now look forward to organisations which offer social, environmental as well as financial returns. According to a report published by McKinsey, impact investments in India has the potential to reach $6 billion to $8 billion by 2025.[1] However, the lack of recognition and identification of business enterprises that create social impact is still a major obstacle. There is a need to dispel the myth that only philanthropists should invest in social returns. Impact Investing, if done by mainstream investors has the capacity to fund and scale methods to improve millions of lives. The establishment of Social Stock Exchange in India should be of interest to both philanthropists and international investors looking to invest in socially-driven enterprises.
The Hon’ble Finance Minister has proposed the creation of the Social Stock Exchange to list Social Enterprises and voluntary organizations. The proposed structure is likely to fall within the ambit of the Securities and Exchange Board of India (SEBI) which would enable these enterprises to raise capital by traditional means. The enormous size of demography and reduced investments in priority sectors are some reasons why impact investing is the need of the hour. India needs a massive amount of funds to be able to meet the human development objectives. Thus, this step of the Government could be a favourable one. However, there are multiple issues that need to be examined to be able to manage and regulate Social Stock Exchanges in India. Having said that, there needs to be in place an unambiguous definition of what does or does not constitute a “social enterprise” and “voluntary organization.” The belief that impact investing generates lower returns needs to be busted, to attract investors. Further, strong investor protection norms, listing requirements and enforcement mechanisms are critical for establishing a successful impact investment design. The SSE platform would also serve as an easier method for meeting the corporate social responsibility (CSR) compliances. Considering the fact that some social enterprises receive funding from corporations, allowing CSR spending to be made through this platform would be a worthwhile opportunity.
In effect, with a blend of high social needs and a robust regulatory framework, SSEs could be a great move in the right direction. The current developments show incredible potential to truly tap the investment space. However, the blunders, such as an underdeveloped regulatory framework and lack of clarity in case of social venture funds should not be repeated to make SSEs and impact investment a resounding success in India.


[1] Sindhuja Balaji, ‘How Impact Investing in India Is Proving To Be More Profitable Than Expected’ (Forbes, 10 October 2018) <> accessed 2 November 2019  

[i] KPMG, “Understanding impact investing, common terms and what they mean”, 2018 <> accessed
2 November 2019

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