News: SEBI approved the creation of a social stock exchange to enable non-profit organisations and for-profit enterprises raise funds.
About SSE:
Social Stock Exchange(SSE) is a platform that allows investors to invest in select social enterprises or social initiatives.
- Social Enterprise is a revenue-generating business. The primary aim of social enterprise is to achieve a social objective such as providing healthcare or clean energy.
- Aim of SSE: The aim is to help social and voluntary enterprises to raise capital in form of equity or debt or a unit of the mutual fund.
- Global Examples: SSE exists in countries such as Singapore, UK among others. These countries allow firms operating in social sectors to raise risk capital.
In India: The proposal for the creation of a Social Stock Exchange was put forth by Finance Minister Nirmala Sitharaman in her Budget speech in July 2019.
It works under the capital market regulator SEBI.
The Social Stock Exchange will be a new segment of existing stock exchanges.
- In 2019, SEBI constituted a group under the chairmanship of Tata group veteran Ishaat Hussain.
- In 2020, SEBI again set up the Technical Group(TG) under Harsh Bhanwala, ex-Chairman, NABARD. This time for getting further expert advice and clarity on SSE. That committee submitted its report.
SEBI guidelines on ‘social enterprises’ transacting on SSE:
- Eligibility- Non-profit enterprises and for-profit social enterprises with an explicit social intent and impact will be allowed to list on the Social Stock Exchange.
- Product that can issued for fundraising by enterprises- These entities will be allowed to raise funds from investors through social stock exchange will have to register with the same. Some products they can offer are:
- equity,
- Zero Coupon Zero Principal bonds,
- Mutual funds,
- social impact funds and development impact bonds.
- Social venture funds will be renamed to social impact funds under SEBI AIF regulations with a minimum corpus requirement reduced to Rs 5 crore from Rs 20 crore earlier.
- Auditing- Initially only reputed auditing firms having expertise in the area of social audit will be allowed to carry out audits employing social auditors who have certification courses with the National Institute of Securities Management.
- Annual Report: Entities listed on SSE will have to disclose their social impact report on an annual basis. This report should cover aspects such as “strategic intent and planning, approach, impact scorecard”.
- Capacity Building Fund ( CBF ): SEBI recommended that the size of the total fund of the corpus be Rs 100 Crores, to improve the ability of all stakeholders to navigate SSE, its process, instruments etc.
- The fund could also be useful in hand-holding NPOs (which are ready or almost ready for registration) on aspects such as outcomes and impact assessment.
- CBF, to be housed in NABARD, as an administrative fund. Exchanges and other developmental agencies such as SIDBI shall also contribute. CSR funds should also be permitted to contribute towards CBF.
