Business as very similar

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.



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9 responses to “Business as very similar

  1. I totally agree David. We reap what we sow and this is yet another example of window dressing/greenwash in my opinion. The criteria are so board as to be meaningless. They will run into problems as potentially every listed company with a CSR programme will qualify (including tobacco and arms companies). The assessors will need much stronger guidance on criteria or be open to claims of bias and it would be interesting to see how the panel can make any judgement based on such vague guidance.


  2. Alisdair Cameron

    The waters of social enterprise can at times seem to be teeming with sharks. This does look like (more) feeding of the sharks.


  3. No more than I expected when I first read that it was for companies with a considerably larger turnover than the average grassroots social enterprise. Muhammad Yunus has also spoken of a social stock exchange. thought I don’t imagine this would be his interpretation of it.

    What government and their corporate friends miss completely is the dedication and passion of legions who want to pay a part in an authentic social economy. All this does again, is keep most of us out. In this he risks turning good will toward anger and cicil unrest.

    It’s been plain to me for the last decade that stimulating the social economy bottom up is the way to go. Here’s a story of events that began to develop 6 years ago when a candidate for the US presidency took a stand against global poverty.

    A proposal for a grassroots social investment fund of 1.5 billion dollars would bounce off Barack Obama to become a political pledge for a 3.5 billion dollar fund. In practice is became a 100 million dollar fund for “experienced grantmaking intermediaries” and this was repicated in the UK with Big Society Capital.

    By 2011 it was too little too late and Occupy Wall Street exploded.

    Bucking the trend however is a grassroots social investment fund in Northern Ireland, where perhaps the risk of ignoring social need are more obvious.


  4. Bobby McBob

    A great post.

    Don’t forget that the social reports are paid for as well, see here:

    Another aspect that is worth considering is whether SSE is a viable business that will produce a financial return, or whether it is a sexy-sounding drain on funding that could be better placed elsewhere. If it just consumes impact funding and grants, without producing a social/financial return, it is a net negative in a economic/social sense, as well as boosting the supply of bullshit in our bullshit world.


  5. Les Huckfield unearthed some interesting facts about Big Society Capital recenlly in his review of their annual report.including those who benefit financially from its existence. .

    Recenly my attention was draw to an article on Civil Society Magazine about the Charity Law Conference where BSC was heavily represented.

    ‘The strength of the social enterprise brand within commissioning was highlighted at yesterday’s Charity Law Conference during a panel debate on social enterprise.

    The debate, which asked whether social enterprise enhanced, confused or devalued the charity brand, included speeches from Caroline Mason, chief operating officer at Big Society Capital; Stephen Lloyd, partner and senior counsel at Bates Wells and Braithwaite (BWB); Luke Fletcher, a partner at BWB and Debra Allcock Tyler, chief executive of the Directory of Social Change.

    A delegate at the conference, who worked for St Andrew’s Healthcare, said that social enterprise was devaluing the charity brand: “It causes confusion in the marketplace,” she said. “We’ve been told by commissioners that if we call ourselves a social enterprise we will win contracts. But we are a professional organisation and provide a good quality service. We shouldn’t need the social enterprise rebrand.

    “Social enterprise also opens the door for rogues who want to pretend to be doing good and take advantage,” she added.’

    Given my own “twisted by knaves” experiences it’s difficult to disagree with her.,I’ve made the same points about adding value in the public supply chain, making profit which is re-invested in a social purpose.

    To be clear. This is profit for purpose, not along with purpose or profiting from a social purpose as advocated in Creating Shared Value..

    The “bottom line” of this interpretation of social business it the benefit to humanity, in which I find alignment with Muhammad Yunus, who says “It’s all about others”.


  6. Beanbags admin

    Thanks for comments. I think Social Stock Exchange is definitely an example (though not the only of one) of a big shift in direction in UK ‘social investment’.
    I’ve always been sceptical about the Big Society Capital (BSC) model and expressed that scepticism here when it was still an idea being promoted by the previous New Labour government.

    For me, the constraints outlined here, make it unnecessarily difficult (though by no means impossible) for BSC to make investments that will result in positive social change that wouldn’t otherwise have taken place. But I acknowledge that there are people both on the board and within the staff at Big Society Capital who, despite operating within these constraints, genuinely do want to support social enterprises and to invest in innovative approaches to meeting social need.

    Unfortunately, the emergence of the Social Stock Exchange in the form it’s emerged, is a stark illustration of the fact that they’re not winning the argument. The vision that’s winning is that one that sees social investment or ‘impact investment’ as a convenient new way for the rich and powerful to slice and dice their wealth and power.

    That’s a vision that they’re completely entitled to pursue (and I have no reason to doubt their good intentions in doing so) but it’s not an alternative to the approach that crashed the world economy in 2008 – it’s an expansion of it – and it’s not something that very many people in the social enterprise movement will want to have anything to do with,


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