The Social Stock Exchange (SSE) is a pioneering platform designed to support organizations dedicated to social causes by helping them raise funds and access capital through stock exchanges. This regulated platform serves as a conduit for channeling investments into social enterprises, promoting positive societal change.
The core purpose of the SSE is to connect donors with social enterprises, facilitating a space where organizations can secure funding for their initiatives. Investors, in turn, are provided with opportunities to support projects that have a meaningful impact on society.
Market participants have appealed to the Securities and Exchange Board of India (Sebi) and the government for additional incentives for contributions to social enterprises via SSE. Notably, corporate social responsibility (CSR) funds currently do not enjoy tax benefits under Section 80G of the Income Tax Act, which poses a challenge for incentivizing contributions.
Both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) have received approvals to operate an SSE. The BSE received an in-principle approval in October 2022, while the NSE was granted final approval in February of the same year. Currently, the NSE has onboarded 18 organizations, and the BSE has registered 14, with some overlapping registrations.
Despite the establishment of the SSE, fundraising activities have yet to commence due to unresolved operational challenges and questions regarding additional benefits. For organizations to participate, they must be registered as charitable trusts with valid PAN for at least three years and provide an audited annual impact report. They also need to adhere to specific reporting standards.
Organizations on the SSE focus on sectors such as eradicating hunger, promoting sports training, financial inclusion, disaster management, and education. However, certain groups like corporate foundations, political or religious organizations, and trade associations are not eligible to register.
For-profit entities working towards social causes can also raise funds through the SSE. Their options include raising capital via equity, alternative investment funds, and debt securities.
SSE issuances by social enterprises typically remain open for a subscription period of 10-15 days. As these funds are essentially donations, secondary sales of zero-coupon zero-principal bonds are not applicable.
Conclusion: The Social Stock Exchange is an innovative platform aimed at fostering social impact through investments. By bridging the gap between investors and social enterprises, it promotes a collaborative approach to addressing societal challenges and driving positive change.
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