What is a “Social Enterprise?”
- POSITIVE SOCIAL IMPACT AS PRIMARY MOTIVE. The popular term “social enterprise” has come to mean different things to different people. For IIX’s purposes, a Social Enterprise meets the following key criteria:- specific positive social impact is primary reason for the entity’s existence (not an ancillary or secondary development, such as a company’s Corporate Social Responsibility program)
- business model reflects responsible entrepreneurship and growth for staff and overseers, beneficiaries/customers, overall community/environment
- has a market orientation
- FOR-PROFIT OR NOT-FOR-PROFIT. Our definition of Social Enterprise embraces for-profit as well as not-for-profit entities.
What is an “Impact Investor?”
- SEEKING FINANCIAL AND SOCIAL / ENVIRONNMENTAL RETURN. Impact Investors are individuals or entities who are putting their capital to work in investments that “seek to generate both financial return and social and/or environmental value – while at a minimum returning capital, and, in many cases, offering market-rate returns or better.” (Source: Global Impact Investing Network [GIIN])
- MORE THAN SRI. Importantly, Impact Investing differs from “socially responsible investing” (SRI), which seeks to avoid investments in “sin” industries, such as tobacco. In contrast, Impact Investors proactively focus their investments on “businesses and funds that can harness the positive power of private enterprise.” (GIIN)
Why do we need a social stock exchange? Why not encourage Social Enterprises to list on an existing exchange?
- ACCESS TO GROWTH CAPITAL. A social stock exchange will allow sustainable Social Enterprises to raise capital in a traditional capital market setting based on both their social / environmental and financial results.
- INCREASED VISIBILITY AND LIQUIDITY. A small number of social purpose businesses are already listed on existing exchanges; however, due to lack of investor understanding of their social goals, their securities have often not traded well, with limited visibility and liquidity and relatively low valuations. Most investors on these exchanges focus solely on financial returns and often view a Social Enterprise’s social mission as a distraction that gets in the way of maximizing profits.
- PROTECT AND CHAMPION SOCIAL MISSIONS. Many social entrepreneurs are also fearful that bringing on board unaligned investors focused solely on maximizing profit will lead to mission drift.
- EFFICIENT SOCIAL MARKETPLACE CATALYST. The few listed Social Enterprises, scattered among traditional pure-profit companies across various exchanges, are not easily identified by interested Impact Investors. A specialised social stock exchange which aggregates Social Enterprises and connects them with Impact Investors would be attractive to both the investors and the Social Enterprises seeking capital.-For Social Enterprises, IIX will deliver a base of Impact Investors that understands their business models and values their social mission.
-For Impact Investors, IIX will reduce the cost-of-search and permit easier and targeted coverage by research analysts interested in the sector, driving down transaction costs for all – including brokers, market-makers and Impact Investors.
- TRANSPARENCY. By requiring listed Social Enterprises to report on their social impact, not only their financial impact, IIX will add a new dimension to the transparency that stock exchanges offer to investors.
Why not just create an index product?
- LIMITED POOL. An index of listed Social Enterprises would likely help to raise the profile of specific Social Enterprises and ultimately help to increase the amount of capital available for Social Enterprises generally. As such, it would represent a laudable advance.But creating such an index would face a number of hurdles, most obviously the small number of currently listed Social Enterprises in Asia. An index would ideally capture only those entities listed on regulated exchanges, further limiting the size of the universe.
- INEFFICIENT MEANS TOWARDS GOAL OF CAPITAL-RAISING. The creation of an index would not directly help newly listed companies raise capital through the Initial Public Offering (IPO) process.
- LACK OF COORDINATED TRANSPARENCY. An index of companies across various exchanges will not offer coordinated and consistent authentication, admissions procedures, market rules, and transparency and disclosure requirements.
What is unique about IIX?
- PIONEER. IIX has recently launched its Impact Partners platform, Asia’s first private platform dedicated to connecting Social Enterprises with Impact Investors. In addition, IIX is developing Impact Exchange which, when launched, will be Asia’s first social stock exchange.
- UNIQUE FOCUS ON SOCIAL ENTERPRISES: IIX is uniquely focused on providing platforms for capital raising by social enterprises. Impact Partners is a private platform open exclusively to Asian Social Enterprises and to sophisticated Impact Investors.
- UNIQUE VENUE FOR RAISING CAPITAL: Impact Exchange will provide a uniquely differentiated venue for Social Enterprises seeking to raise capital through primary offerings of shares or bonds and for social purpose investors seeking the ability to make investments in Social Enterprises with full liquidity and transparency.
- BROAD EXPOSURE TO SOCIAL MARKETPLACE. IIX is developing its Impact Exchange platform with a view to being a fully regulated exchange, offering liquidity and transparency. Once launched, Impact Exchange will provide access to a range of Impact Investors that is much broader than those able to make private investments in Social Enterprises today. This will include charitable endowments, family offices, and other institutions, as well as high-net-worth individuals and retail investors. IIX also expects to attract investment from existing SRI funds and to encourage the development of funds targeted at investment in Social Enterprises.
- CREATING A NEW ECOSYSTEM. IIX is pulling together the entire ecosystem (regulators, research companies, rating agencies, brokerage firms, investors and Social Enterprises) required to launch an effective exchange.
What is the difference between IIX and other “Social Stock Exchanges”?
- INVESTMENT MARKET, NOT CHARITABLE GIVING. Other “social stock exchanges” or “social investment exchanges” primarily facilitate philanthropic or charitable giving to not-for-profit entities. For example, BOVESPA in Brazil does admirable work facilitating grants from philanthropists to not-for-profit entities in a non-regulated environment. In contrast, IIX will facilitate actual market investments in a regulated environment by Impact Investors in economically viable Social Enterprises (for-profit and not-for-profit) throughout Asia, which will generate both economic and social/environmental returns. IIX will list only fungible, tradable securities – with an attendant secondary market – as authorized and regulated by the financial regulator.
Is there a need for more than one social stock exchange globally?
- GEOGRAPHY, CULTURE. As is the case in the traditional securities markets, we expect that most Social Enterprises will prefer to initially list on an exchange in proximity to their business operations. Likewise, investors tend to be most comfortable investing in or near their home markets. By focusing on Asia, IIX will provide an attractive and convenient venue for many Social Enterprises and Impact Investors in Asia. IIX will also seek to eventually attract dual listings from Social Enterprises outside Asia.
How will IIX measure and report on social and environmental returns?
- BUILD ON EXISTING EFFORTS. The ability to measure and report on the social / environmental return generated by listed Social Enterprises will be an important factor in attracting Impact Investors to the exchange. While there is no universally accepted method of social return reporting, a number of recent efforts are making considerable progress in creating workable metrics.
- CONSULT AND TEST WITH PARTNERS. Working in conjunction with the Program on Social Innovation and Change at the Lee Kuan Yew School of Public Policy in Singapore, and drawing on existing work being done in the field, IIX is confident that it will be able to develop a workable standard that will meet Impact Investors’ desire for transparency while meeting Social Enterprises’ need for a system that is not unduly complex to apply. IIX will consult extensively with Social Enterprises and Impact Investors to ensure this is the case.
I’m a Social Enterprise based in Asia but outside of Singapore. Why should I choose to issue shares/bonds on an exchange based in Singapore?
- PROVEN GLOBAL FINANCIAL CENTER. Singapore has established itself as one of the few globally viable financial hubs within Asia. It is a regional financial center with a large concentration of investors and financial service providers, including local arms of many international financial institutions. As such, it provides access to a large and global pool of investment capital. Singapore’s markets also enjoy a reputation for strong regulatory standards which will provide credibility for the exchange and confidence to investors.
- SOCIAL FOCUS, NEW CAPITAL. Listing on a social stock exchange will provide unique access to a large pool of Impact Investors that will reach beyond national borders, opening up a potential new source of capital.
I am an interested Social Enterprise or Impact Investor. How do I get involved with IIX?
Terrific! Please talk to us through our “Contact” page and the IIX team will look forward to hearing from you.