A market for social enterprises

A social stock exchange is a segment where organisations that exist for a social purpose can raise money under a disclosure regime, and where donors and investors can find them. It is not a second equity market with a kinder adjective. This chapter explains the job the segment is trying to do.

The problem it is aimed at

A non-profit that does useful work usually raises money through relationships: a few foundations, a corporate-social-responsibility desk, a mailing list. The documents that would let a stranger judge the organisation are uneven, and there is no ordinary place where those documents sit next to a comparable organisation’s documents. A for-profit that hires people the labour market ignores, or that sells an essential service at a thin margin, has the opposite problem: the equity market understands profit and is suspicious of a mission that might cap that profit. The social segment is an attempt to give both kinds of organisation a place to publish a standard set of facts and to raise money from people who are not already in the room.

What it is not

It is not a guarantee that the organisation is effective. A listing regime can demand disclosure. It cannot demand that the programme works. It is not a promise of a financial return. Some instruments on the segment are donations. Some are investments with a financial claim. The word ‘social’ does not tell you which one you are looking at. And it is not a way to avoid the ordinary questions. Who is on the board, where the money went last year, whether the accounts were examined, and what would count as failure are still the whole of the job. The segment only makes those questions easier to ask in one format.

Why a separate segment exists at all

Ordinary listing rules are built for companies with shareholders and dividends. Stretching them over a trust that does not have shareholders produces either a fake set of numbers or an exemption so wide that the disclosure disappears. A separate segment can write rules that fit a non-profit’s accounts and, separately, rules that fit a for-profit social enterprise’s accounts, without pretending the two are the same. The price of that separation is that you must learn a second set of words. Do not import your equity habits unchanged. There may be no ticker that trades all afternoon, no earnings per share, and no obvious moment at which you are ‘right’.

What to remember

• The segment is a disclosure-and-fundraising venue for organisations with a stated social purpose.
• Disclosure is not the same as effectiveness, and it is not the same as a financial return.
• A donation and an investment can sit near each other. Read which one the document is.
• Equity-market habits — price charts, earnings, a quick exit — may have nothing to attach to.
• The useful work is still the board, the accounts, and a definition of failure.