Boasting an investment of £850,000 from social investment wholesale finance institution, Big Society Capital, the Social Stock Exchange is a project that’s formed an integral part of the UK social investment bullsh!t machine for several years. While many in the social enterprise sector doubted that it would ever arrive at all, even the pessimists are likely to be disappointed by its shamelessly comical failure to deliver on either of the elements implied by its name.
At yesterday’s launch, prime minister, David Cameron, hailed the project proclaiming: “This is just the beginning… For years the London Stock Exchange has made London the home for private finance. Today London can cement its place as the home for social finance, too.”
The exact role of the Social Stock Exchange in building the home of social finance is not immediately clear. What it definitely isn’t, is an exchange where people or institutions can trade stock: “Can I trade on the Social Stock Exchange. No. The Social Stock Exchange isn’t a trading exchange. It connects social impact businesses with investors looking to generate social or environmental change as well as financial return from their investment.”
On that basis, you would assume that it’s a bit stronger on the ‘social’ side of things. There’s certainly reasonable clarity about what the Social Stock Exchange team consider ‘social’ to mean. As chief executive, Pradeep Jethi, explains on Guardian Social Enterprise Network, member companies are: “not necessarily what you may think of as the classical definition of ‘social enterprise’, but we think that everyone benefits from being a bit broader about this concept.”
Instead of ‘classically defined’ social enterprise, Social Stock Exchange defines the businesses they’ll be showcasing as ‘Social Impact Businesses’ explaining that: “A Social Impact Business is one that uses commercial models to organize, mobilize and manage a for-profit business that delivers social and environmental change.”
The practical function of the Social Stock Exchange is to: “connect Social Impact Businesses with investors looking to generate social or environmental change as well as financial return from their investment”
The Exchange will “provide investors with the information they need to identify and compare those organisations that deliver value to society and the environment”
The process of becoming a member: “includes the publication of an Impact Report and application for admission to an independent Admissions Panel.”
The eligibility criteria for membership are that: “your company must:
- have social or environmental impact as a core aim;
- be publicly listed.“
Amongst the founder members of the Exchange, the largest by market capitalisation is Primary Health Properties – a company that buys (or builds) healthcare facilities and leases them to the NHS. In 2012, they made a profit of £13.4million in doing so.
This is a perfectly legitimate private business activity but the primary social and environmental change they’re delivering is to take cash out of the social pot (the NHS) and put it into the pockets of their shareholders. Perhaps, their ‘Impact Report’, on Social Stock Exchange might provide some evidence about the additional social value they’re delivering?
Well, what they’ve come up with so far is: “At present, PHP does not operate a comprehensive social impact measurement system on a regular basis. However, in future, it is committed to setting in place a monitoring framework to help it evidence social value.”
It’s unclear whether the Social Stock Exchange we’ve ended up with is the same one that has been failing to appear in the role of Godot on the UK social investment stage for all these years. In an interview with me in 2011, Social Enterprise UK (SEUK) chief executive, Peter Holbrook, explained that: “I think one of the really exciting developments is the idea of a Social Stock Exchange. It’s been hanging around for a little while but my understanding is that it’s going to be launched this year. I think it’s fundamental in connecting individuals with a true social purpose.”
He continued: “I’ve got my pension in an ethical fund which is environmentally light green if it’s green at all – it’s probably turquoise. I would love to be able to say to my pension fund administrator: ‘Actually, I don’t want your turquoise or your light green fund – which just pulls out the very, very worst offending companies: tobacco, arms and similar activities. Actually, I want to invest in companies that are genuinely socially beneficial and therefore I want you to invest my pension in the Social Stock Exchange.”
I don’t agree with Peter Holbrook on everything but he’s both an intelligent man and someone whose definition of ‘social’ is considerably stricter than mine. I’d be surprised if he’s really spent the last two years getting excited about a vehicle for salving the consciences of the small percentage of people who were being kept awake at night by the idea that their pension was being invested in a tobacco company rather rather than being put to the more positive use of financing the privatisation of public buildings.
Even in the event that they view this outcome of positive, it’s not immediately obvious how the Social Stock Exchange might enable individual pension holders such as Holbrook to bring it about. While Pradeep Jethi claims that the Exchange: “helps to ‘democratise’ social investment, by allowing ordinary citizens to learn about potential investments in publicly listed social businesses, something that’s harder to do with classical social enterprises” there’s no explanation as to how it will do so.
Some example of existing platforms that are fulfilling that function include Ethex and, for those who think ‘classical social enterprises’ might be worth investing after all, the soon-to-be-launched Community Shares platform, Microgenius.
At best, the Social Stock Exchange is a brokerage service for listed companies that engage in some sort of activity that could in some way be described as social. If there’s a market for that amongst companies and investors, it’s a perfectly decent idea for a private business – but not one that justifies either investment from Big Society Capital or a launch by the Prime Minister.
At worst, it’s another in the UK social investment sector’s seemingly endless series of baleful attempts to prove that they can solve major social problems with a form of social business that’s essentially the same as conventional business but produces a few more reports.