Social Impact Investing

SOCIAL IMPACT INVESTMENT: BUILDING THE EVIDENCE BASE
direct contact as possible between fund managers and the “front line” (i.e. to listen to people who are
actually doing the work) to truly understand the operating model and key success factors.
3.5.2. Social Stock Exchanges
3.35 Over the past several years, social stock exchanges have been created in both OECD and non-
OECD countries. These include Social Stock Exchange (SSE) in London, Nexii in South Africa, and
Impact Investment Exchange (IIX) Asia in Singapore (the latter two have since merged). These exchanges
target smaller high growth enterprises in sectors such as health, education, environment, social and
affordable housing, sustainable forestry and organic agriculture and other “base of the pyramid”
interventions. Social stock exchanges seek to build a platform for social businesses to attract capital from
individuals, private clients, family offices, foundations and institutional investors who are seeking both a
social and a financial return.
3.36 These markets facilitate the purchase of stocks and bonds in companies that have both economic
and social returns. These could be either non-profit or for-profit companies. For-profit companies can
either issue shares representing ownership in their companies or issue bonds. Not-for-profit companies can
utilise the stock exchange to issue bonds. The London Social Stock Exchange was launched in 2013 with
the aim to become a FSA-authorised and regulated investment exchange for trading in securities of social
enterprises and other social purpose businesses (HM Government 2013a). Supported by the London Stock
Exchange Group, the SSE has a number of listed member companies.
3.37 The London SSE seeks to connect socially focused businesses with investors looking to generate
social or environmental change as well as financial return from their investment. This is done by providing
investors with information to identify and compare organisations that deliver value to society and the
environment. The London SSE seeks to have a transparent, independent and rigorous admission process to
ensure that the companies listed adhere to a clear set of values, standards and disclosures.
3.38 In 2013, Nexii and IIX Asia agreed to collaborate to strengthen and standardise the impact
investing sector and later merged. Impact Exchange aims at being a social stock exchange with significant
global reach, from Africa to Asia, two regions in need of capital assistance for sustainable development.
Impact Exchange aims at becoming a platform for the public to invest in and trade shares of social
enterprises while assuring mission alignment to social and/or environmental impact.
3.39 Intermediaries/advisors pay an application fee as well as an annual membership fee, which allows
them to become members of the exchange. The companies or organisations don’t need to be profitable
when they join as the rules allow a three year window to become profitable (but based on a clear plan to do
so). They pay for advisors as well as for the application and listing fees. Rigorous reporting requirements
are part of eligibility. Organizations can be delisted or suspended if they do not comply.
3.5.3. Building Market Infrastructure and Capacity
3.40 Creating the necessary infrastructure and building capacity is important to the development of the
market and, as a result, a number of these initiatives have been led by governments, foundations and others
(IIPC, 2014). To build the market, collaboration is crucial for ensuring that the roles of the various players
are complementary (HM Government, 2013c). Trust and open communication is important for the process
of market building. This provides the basis for the creation of new innovative models, which can be tested
in a continual process of development and growth of the market.
30 © OECD 2015