Social Stock Exchange: The Next Stage of Sustainability?

By Kelsi Boyle, Communications Associate

A recent Ode Magazine article discusses the opportunities and potential pitfalls of social stock markets.  This fall in the U.S., IC Member Michael Van Patten plans to launch Mission Markets. Similar to those social stock markets in Brazil and South Africa, Mission Markets would be a private, unregulated exchange designed to connect social-purpose businesses and accredited investors.

As consumer consciousness around environmental and humanitarian issues is on the rise, we find more and more emerging businesses dedicated to solving such global problems.  What used to be solely the work of non-profit organizations is now being embraced by for-profit mission-based enterprises–the type of companies who seek funding through IC’s mission-based investor network.  Daniel Crisafulli, Director of Ecosystem Investments and Partnerships at the Skoll Foundation, explains that “you have a lot of people coming from business school, or the business sector, and they want to take their knowledge and the language they’re comfortable with and bring it into the social sector.”  In the social stock market, companies that incorporate social or environmental missions into their bottom lines meet investors and donors interested in enterprises and non-profits that satisfy business standards.  Interested investors would receive a full profile of the undertaking, an itemized budget, evaluation of the project’s risks, and the organization’s strengths and weaknesses. Every item that can be measured is measured, including a project’s impact on beneficiaries’ quality of life.

But what are the effects of imposing market metrics on social activism?

Michael Edwards, author of Just Another Emperor?, a book on what he terms “philanthrocapitalism,” is not convinced this is the direction modern enterprises should be headed.  He fears that a blurred line between non-profit and for-profit sectors means merging conflicts and negative values of traditional business with the non-profit sector. “In the future, will there be anyone left who responds to something other than a market incentive?” he asks.  Moreover, if non-profit and for-profits go head-to-head in an open market without an accurate method of quantifying social benefit, will greenwashing for-profits with measurable financial return simply crush the competition?

Then again, there are people out there determined to help these for-profit/non-profit/mission-driven/hybrid companies succeed.  B Corporation, a pioneering organization that seeks to measure the impact of social enterprises through their “B Survey,” is one such vehicle working to standardize and legitimize social impact.  IC Member Andrew Kassoy, co-founder of B Corp, says the current credit crisis may be an opportunity to do just that. “The markets focus on the short term, and now everyone realizes that’s not always good for the long term,” he says. “Investors are hungry for something new.”

While a mission-based company may flourish in a social stock exchange, it also has the potential to lose or lessen its social/environmental impact once it grows or goes public.  Success in the market results in an ability to garner more investors, but not necessarily the type of investors with goals beyond maximizing returns.  Pradeep Jethi, a veteran of the London Stock Exchange, believes that “most social entrepreneurs stay away from the capital markets because they fear mission drift.”  Investors’ Circle addressed this exact concern during our Spring Conference Debate: “The Sell Out.”  You can watch panelists and audience voice their perspectives here.

Ultimately, isn’t our goal all the same—to make our world a better place by harnessing the power of capital?  So what is the answer to this non-profit/for-profit question?

We at IC welcome your insights, concerns, and solutions.


8 Responses

  1. Great article. Thanks for the info. I think you’re right when you touched on the “blurred line between for-profit and non-profit” that could lead to issues. The great thing about non-profits is the cause they support comes above everything else, where a for-profit business lives and dies by the bottom line. On the other hand a for-profit business could afford better talent to make a greater impact Very interesting stuff.


    • Thanks for your feedback, Mac! I agree that solid mission is exactly what our world needs and exactly what one expects from non-profits. It is great that here at IC, we have companies with JUST as much of an emphasis on mission as NPs… but with a more traditional business structure and potential to scale. I look forward to seeing how many more businesses follow this model as time goes on…..

  2. it’s clear the market does not solve every problem. there is no market based solution to malaria nets, i believe. the people who need them, mothers in sub saharan africa and children one to five have the least money and the least amount of political power. it will need a subsidy. either or thinking is the problem. we need all the capital deployed possible based on the severity of the problems that confront us. getting immersed in binary debates is yet another distraction and should not be allowed to hold back the acceleration of the flow of capital to good, imho.

    • Always great to hear your thoughts, Kevin. Thanks for reminding everyone out there that we’re on the same team.

  3. […] Markets is a new exchange that connects social businesses and accredited investors.  Read here for some thoughts from Investor’s Circle about the development of Social Capital […]

  4. It all comes down to the mission. I wrote about Danny Kennedy, a former Greenpeace activist who started a not-only-for profit solar-power company, Sungevity, that has a portal for contractors and customers. (I believe he presented at the last Investors’ Circle conference). Clearly, Greenpeace’s mission does not lend itself to a for-profit. But other objectives lend themselves nicely to a for-profit and, in fact, need the ability to scale that the for-profit structure creates.

    Anne Field
    my blog: Not Only for Profit via True/Slant

    • Thank you for your thoughts, Anne! You are correct, Sungevity did present at our 2009 Spring Conference here in SF. I love hearing how non-profits and for-profits can work in conjunction with one another so that everyone benefits.

  5. 1.In USA, UK and Canada, is it possible to list the SSE like original stock exchange?
    If we want to list social enterprises, previous thing we have to do is evaluating the social enterprises clearly.
    But this is very difficult to calculate the social effects which are generated by social enterprises.
    Unfortunately, evaluating tools about the social enterprises are not completely researched and built in Korea
    So we want to know about the standards that evaluate the social enterprises and tips.

    2.Tell us the specific process of establishing SSE, and also difficulties and advises related to SSE.
    In Korea, we are pioneer about social enterprise, especially SSE. But as we said earlier, we are just undergraduate students who have limitation and struggles in the process of gaining information.
    Your answer would be good not only us, but also our society to become healthy and happy.

    We are looking forward receiving your reply as soon as possible.
    Thank you for reading.

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