A technical group on social stock exchanges (SSEs), constituted by the Securities and Exchange Board of India (Sebi), has recommended that political and religious organisations, trade organisations as well as corporate foundations should not be allowed to raise funds through SSEs.
“Corporate foundations, political or religious organizations/ activities, professional or trade associations, infrastructure and housing companies (except affordable housing) will not be permitted on SSE,” said the technical group report released by Sebi on Thursday.
Sebi set up the technical group in September under the chairmanship of Harsh Bhanwala, former chairman of NABARD.
The technical group report said both For Profit Enterprise (FPE) and Not for Profit Organisation (NPO) will be eligible to tap the SSE if they are able to show their primary goals are social intent and impact.
SSE are engaged in at least one of the 15 broad eligible activities. They target underserved or less privileged population segments or regions; and should have at least 67 per cent of its activities qualifying as eligible activities to the target population.
The panel has recommended different modes of fund raising for NPOs and FPEs. For NPOs it has recommended fundraising through “equity, zero coupon zero principal bond, development impact bonds, social impact fund with 100 per cent grants-in grants out provision, and donations by investors through mutual funds”. For FPEs it has recommended fundraising through equity, debt, development impact bonds, and social venture funds.
The report said that entities listed on SSE will have to disclose their social impact report on an annual basis covering aspects such as “strategic intent and planning, approach, impact score card”.
The report has also made a list of eligible activities that social enterprises can engage in such as eradicating hunger, poverty malnutrition and inequality; training to promote rural sports; promoting gender equality by empowerment of women and LGBTQIA+ communities; slum area development/ affordable housing;forest and wildlife conservation; promoting livelihoods for rural and urban poor; promotion of financial inclusion among others.
The expert panel has said FPEs, which wish to list their equity or debt, will first have to demonstrate their track record through social performance. This will allow investors to gain an insight into the FPE’s activities.