Demystifying the Social Stock Exchange (SSE) in India

1. Introduction

The Social Stock Exchange (SSE) is a pioneering initiative introduced in India to bridge the funding gap for social enterprises. It offers a novel platform where social impact and financial markets intersect, enabling Non-Profit Organizations (NPOs) and For-Profit Social Enterprises (FPEs) to raise capital from the public through a transparent and regulated mechanism.

2. Genesis of the SSE in India

The idea of a Social Stock Exchange was proposed by the Finance Minister in the Union Budget 2019–20. Recognizing the funding challenges faced by social enterprises, SEBI constituted a Working Group (2019) and later a Technical Group (2020) to frame its regulatory contours.

On July 25, 2022, SEBI notified the framework for SSE by amending the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

3. Objectives of the SSE

To facilitate funding for social initiatives via an organized exchange.
To enhance transparency and accountability among social enterprises.
To mobilize retail and institutional investors for social impact.
To enable impact assessment through measurable metrics.

4. Eligibility Criteria for Listing

A. For Not-for-Profit Organizations (NPOs):

Must be registered as a charitable trust, society, or a Section 8 company.
Must be at least 3 years old.
Must have spent at least ?50 lakhs in the past financial year and received ?10 lakhs in donations.
Must have a valid 12A/80G registration under the Income Tax Act.
Should not have political or religious affiliations as a primary objective.

B. For-Profit Social Enterprises (FPEs):

Must demonstrate that their primary purpose is to achieve positive social impact.
Can raise funds through equity or debt instruments.
Will be required to disclose social intent and impact metrics.

5. Instruments Available for Fundraising

Instrument	Applicable to	Mode
Zero Coupon Zero Principal Instruments (ZCZPs)	NPOs	Donation-based; listed without return expectations
Social Venture Funds (under AIF Regulations)	NPOs/FPEs	Fund pooling for targeted impact sectors
Equity Shares or Debt Instruments	FPEs	Through public or private placement on SSE
Grants/Donations via SSE platform	NPOs	Crowdfunding or large-donor investments

6. Regulatory Framework

SSE is housed under the existing stock exchanges like BSE and NSE as a separate segment.
The platform is regulated by SEBI, which has issued detailed guidelines via:
- SEBI Circular dated September 19, 2022 – for NPO registration and disclosures.
- SEBI (LODR) Amendment Regulations, 2022 – applicable to SSE-listed entities.
Social Auditors empaneled by SEBI perform impact assessment.

7. Key Disclosures and Reporting Requirements

For NPOs:

Annual Impact Report (AIR) certified by a SEBI-registered Social Auditor.
Quarterly disclosures on fund utilization.
Governance and key personnel disclosures.
Details of projects funded, beneficiaries, and measurable outcomes.

For FPEs:

Mandatory impact reporting metrics under “Social Impact Scorecards.”
Disclosure of social intent, beneficiary groups, and outcome tracking.
Adherence to financial reporting norms under SEBI regulations.

8. Eligible Activities under SSE

Entities must target one or more of the 15 broad activities as per SEBI’s framework, including:

Eradicating hunger, poverty, malnutrition
Promoting healthcare, education, gender equality
Supporting livelihoods, environmental sustainability
Protection of national heritage, arts and culture
Disaster relief and support for marginalised communities

9. Benefits of SSE

For Social Enterprises	For Investors/Donors
Access to wider pool of donors and investors	Transparent and regulated impact investment
Enhanced visibility and credibility	Tax benefits (for donations under 80G)
Structured impact assessment and validation	Assurance of fund utilization and social ROI
Market-based valuation and scalability	Opportunity to support causes aligned to values

10. Role of Intermediaries

Social Auditors: Ensure validation of impact created, audit the disclosures.
Information Repositories: Assist in data collation for benchmarking.
Stock Exchanges: Provide platform and oversight for fundraising and compliance.
SEBI: Regulates, monitors, and updates the framework from time to time.

11. Challenges and Way Forward

Challenges	Suggested Solutions
Limited investor awareness and participation	Conduct awareness campaigns and financial literacy
Lack of Social Auditing infrastructure	Empanel qualified professionals and training
Risk of greenwashing and data manipulation	Enforce stringent social audit norms
Donor/investor reluctance towards new instruments	Provide incentives and tax clarity

12. Global Context

India’s SSE is inspired by similar exchanges globally:

UK’s Social Stock Exchange (now defunct) – focused on listing impact-driven companies.
Singapore’s Impact Investment Exchange (IIX) – enables social impact bonds and blended finance.
Canada’s SVX – platform for social ventures and funds. India aims to build a more inclusive, robust and regulated impact ecosystem, learning from global models.

13. Conclusion

The Social Stock Exchange represents a paradigm shift in social sector funding in India. By blending transparency, accountability, and innovation, it creates a reliable bridge between mission-driven entities and impact-oriented investors. While still in its nascent stage, SSE has the potential to become a catalyst for sustainable and scalable social change, provided robust regulatory implementation and awareness-building measures are consistently followed.