“We make the rules, pal. The news, war, peace, famine, upheaval, the price per paper clip. We pick that rabbit out of the hat while everybody sits out there wondering how the hell we did it. Now you’re not naive enough to think we’re living in a democracy, are you buddy? It’s the free market. And you’re a part of it.” – Gordon Gecko, Wall Street, 1987
But cynics be warned, there is a new girl in town!
Durreen Shahnaz has been many things in her life – the fourth-born daughter of a middle class Muslim Bangladeshi family, the first Bangladeshi female investment banker on Wall Street, founder of oneNest, an Associate Professor at the National University of Singapore, a proficient Indian Classical dancer…
Oh, and the founder of Impact Investment Exchange (IIX Asia), the world’s first social stock exchange.
IIX Asia is, put quite simply, an organisation that aims to connect “Impact Investors” with “Social Enterprise”.
It is important to note that Impact Investment is quite different from Socially Responsible Investment. This is a more proactive approach; you are not simply avoiding investing in companies whose activities you do not support (eg animal testing), you are looking to truly put your money where your mouth is and invest in companies whose core business provides social and/or environmental value (eg Sun-eee, a company providing renewable energy to rural areas in Cambodia).
However, make no mistake, this is no altruistic exercise – investors are also looking for financial ROI. The absolute worst case scenario for investors is that their investment returns their capital, with many delivering at or better than market rates.
The definition for Social Enterprise (SE) is similarly specific:
- Positive social impact is the company’s primary reason for being (as opposed to a Corporate Social Responsibility program)
- The business model must be one of sustainable growth for all stakeholders
- The business must have a market orientation (ie responds to customer wants and needs)
- It can operate as a not-for-profit or for-profit entity, but is not a charity
The idea of a social stock exchange is a total win-win scenario: with the exposure to Impact Investors and access to capital a social stock exchange supplies, these amazing companies can enjoy the financial growth they require in order to make a real difference in their communities. On the investor side, standardisation of reporting on social impacts and increased transparency offers a confidence not currently provided by the traditional stock exchange where a number of SEs are already listed.
The really encouraging thing is that this idea has legs… long ones!
Prof Shahnaz reports that trends indicate an increased interest in this sort of investment opportunity. Socially responsible investment has grown over the past 15 years from $0 to $7 trillion. Impressively, IIX Asia currently sits at just below $100 million, but projects growth to $0.5 trillion dollars in the next three years.
The IIX Asia was launched in 2012 in partnership with the Stock Exchange of Mauritius, allowing for expansion throughout both Asia and Africa. A second social stock exchange has also been launched in the United Kingdom. That covers a large chunk of the world, but what about the rest of us?
I feel that this is a really exciting idea and one that could form part of an economic solution for many social issues.
Here in Australia, for example, we are currently grappling with how to best address the issue of climate change. While I realise that this idea of a social stock exchange doesn’t completely solve the problem of how to reduce carbon emissions, it may contribute in a positive way by enabling more environmentally focused SEs to get off the ground and helping investors to more easily vote with their wallets and choose to invest in companies who are supporting these goals.
As it turns out, Gordon was more right than he knew – we are all a part of the free market…
and our choices have impact.