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The government announced the introduction of the Social Stock Exchange (SSE) in the Indian capital market during 2019 Budget Presentation.

Following this, the Securities and Exchange Board of India (SEBI) recently set up a panel to provide recommendations on the working and implementation of this concept.

Impact investing is a unique form of investment which seeks to do social good by channelizing the market forces in a direction that addresses the pressing social issues. In order to achieve this goal, however, impact investors bear the task of striking a fine balance between two somewhat opposing imperatives, i.e., financial returns and social benefits.

Impact investing lies at the crossroads between philanthropy and commerce and is a sort of hybrid which has an added objective of public welfare to go along with the conventional motive of attaining profits.

SSE is a measure that will facilitate the investors’ objectives of achieving wide social impact through their investment. This exchange intends to list various social enterprises and voluntary organizations to enable them to mark their presence on a platform to raise the finances needed to sustain their working.

In the absence of a SSE, the market lacks regulatory tools that can meticulously separate the social impact investors from their respective counterparts present in the stock exchange. These differences need to be drawn in an effective manner, failing which the social finance will not be able to achieve its stated objectives. This regulatory vacuum needs to be filled with significant rulemaking.

One of the central functions of the SSE would be to assist these enterprises to commercialize their financing to enable them to raise their operations and reduce their dependency on grant funding.

Secondly, the SSEs undertake the work’ of creating a separate marketplace for social finance, thereby differentiating them from the conventional financial market where the major aim of the investor is to obtain maximum return on their investment.

The SSE can accomplish this by formulating listing criteria for the entities interested in listing on their platform; formulating rules to govern such transactions; laying down requirements to be complied with to stay listed; and establishing guidelines on the basis of which the investors would be permitted to ply their trade on the platform.

Further, the SSE can lay down the mechanism for enforceability of its rules and the conditions for delisting. All such rulemaking processes will go a long way in concretising the difference between the conventional stock exchange and the SSE.

Who among the following will be a part of SSE?

A) Big business houses

B) Notable philanthropists

C) NGOs

D) All the above