The Social Stock Exchange – Pathway to achieving SDGs

The momentum behind establishing a Social Stock Exchange (SSE) is a promising first step in developing India’s impact investing ecosystem. The SSE in India should be able to efficiently combine public and private sources of funding for social enterprises.

The Impact Investors Council of India estimates that between 2019 and 2021, investments totalled about 14.4 billion dollars in India. A sizable amount of funding from impact investments flowed into impact enterprises in the agriculture and financial inclusion sectors.

Impact investments aim to generate a positive financial return as well as measurable social and environmental benefits. Depending on the investor’s strategic goals, impact investments seek to yield returns starting below the market rate and rising to the market rate. In India, impact investments are typically made through commercial deals. In addition to providing a compound annual growth rate (CAGR) of roughly 20%, impact investment directly contributes to raising funding for Sustainable Development Goals.

In India, venture philanthropy also prioritises capital creation over ongoing operating expenditures, in addition to impact investments. A lot of attention is also paid to performance measurement, with an emphasis on strengthening systems and sectors as opposed to promoting individual organisations and funding individual projects.

The objective of the first Social Stock Exchange in India, which will soon be accessible to investors, is to give philanthropists a platform to engage in “project-specific” interventions where the projects will be directed towards a target population with a well-defined objective around education, healthcare, poverty alleviation, etc. These interventions will, to a certain extent, aid in the funding of “non-project” costs (expenses incurred for the acquisition of assets, building capacity of the organistaion, etc.) borne by for-profit social enterprises and non-profit organisations. 

This will strengthen impact financing throughout India’s development sector. The Securities and Exchange Board of India (SEBI) will oversee the establishment of the exchange, thus ensuring its credibility. This initiative will help open the door for a larger infusion of investment to aid the country in achieving its Sustainable Development Goals.