‘Social stock exchange’ could be 18 months awayApril 2010
Money is being raised to start a global stock exchange that will allow investors to trade exclusively in companies with social and environmental goals.
The Social Stock Exchange, to be based in London, could be operating within 18 months if the £2million ($3m, €2.2m) needed to establish it can be raised from potential backers.
Pradeep Jethi, co-founder and chief executive, told EP the exchange will function like any other, will be regulated by the UK’s Financial Services Authority, and could list up to 200 companies within five years. The smallest companies considered for listing are likely to have an annual £500,000 turnover, and anyone applying will be subject to a social audit.
‘We’re not talking about big companies with a good CSR record, but smaller ones that specialise in providing goods and services explicitly for a social purpose,’ said Jethi. ‘That could be anything from a company working in the healthcare or education field, to green technology businesses, fair trade enterprises and any of the ethical consumer companies out there.
‘But this is not for start-ups – it’s for the more mature companies that need to raise significant amounts of money for growth and expansion.’
Jethi, a former new product development manager at the London Stock Exchange (LSE), has already had contact with a number of companies interested in taking a listing, and believes the exchange will open with around 15 businesses.
He said: ‘That doesn’t sound much, but you have to remember that AIM [the LSE’s junior investment exchange] began in 1995 with only ten companies, and more than 1300 have chosen to join it over the succeeding 15 years. If by the end of five or six years we have 300 companies we would be delighted, but after 15 years we also hope to get to about 1300.’
‘It will be a global stock exchange, but I’m assuming that the first few companies are going to be based in the UK, Europe and the US, simply because that’s where these kind of social enterprise companies are more mature. But I expect that over time we will be able to attract businesses from the developing world too – indeed that is our stated goal.’
Jethi and co-founder Mark Campanale, a former SRI specialist at Henderson Global Investors, hope the exchange will attract investment in its companies from ‘long-term, patient, strategic investors’, such as pension funds, that might otherwise have no contact with such businesses.
‘Social stock exchanges’ have been established elsewhere in the world in recent years, most notably in Brazil by the main exchange Bovespa. However, they bear no relation to the latest venture, as they are merely clearing houses for people donating money – for no financial return – to charities and social enterprises.