xchangexchange.com Blog

Brazil’s Social & Environmental Stock Exchange (BVS&A) Celebrates Five Years

Newsweek magazine recently wrote a story on Celso Grecco, founder of the “first” social stock exchange (Brazil’s Social and Environmental Stock Exchange (BVS&A)). The article is a good one - and while it does include under one umbrella term of “exchange” ones in Brazil and South Africa - which are really online donor platforms - and some of the newer exchanges in development which aspire to include not just grants but patient and equity-like capital - it also makes the very appropriate comparison between BVS&A and their suitable peers such as Kiva.org and Donorschoose.org. In fact, although BVS&A is noted as the ‘first’ social stock exchange - given that it allows investor/donors to donate funds to a varierty of pre-screened opportunities - it is in a way one of the first online marketplaces…

Grecco notes how BVS&A - and like exchanges - are helping to meet the deep needs of investor/donors for “order and transparency”. Due to the strong vetting process, the BVS&A provides a true “seal of quality” for listed nonprofits. The online platform for donating and reporting greatly increases the transparency of process and results for donors. As we are increasingly hearing these same needs for ”order and transparency” articulated in many of the initiatives focused on developing a social capital marketplace - the BVS&A does demonstrate the power of meeting these needs effectively. In fact, two examples from the article demonstrate well the value in linking donor capital with organizations in need. One story shows how initial seed funds acquired through the exchange helped a local solution (Viva Rio) grow to actually become part of public policy and replicate in 14 states in Brazil. Another discusses a new project on solar lamps that will both cut energy costs and reduce the carbon footprints of shrimp farmers.. Innovative ideas getting important accces to capital through a trusted source providing order and transparency - good news!

UK Continues to Support Social Capital Markets: New Efforts Aimed at Developing Standard Metrics of Social Return

The UK government continues to support its third sector and the development of a more robust social capital market by announcing it will fund new research exploring possible “standards” of how social return on investment (SROI) is measured. This project will include members from the public sector, social enterprises and investors and will research how to develop a standard methodology for measuring SROI (placing a financial value on social benefits). This newest effort builds upon its earlier announcements of support for new initiatives in social capital markets - including a social stock exchange and a social investment bank (Ron Cohen recently launched the Social Investment Bank - called Social Finance - and the Social Stock Exchange team (led by Mark Campanale and Pradeep Jethi) are capitalizing on their recent seed funding from Rockefeller Foundation to conduct critical research on social enterprises and investors, as well as assessing market interest and looking at the scale of potential social impact.

NonProfit IPO: What does it mean?

While this blog focuses more on conversations and activities in the blended value space - social enterprises, social businesses, and now B corporations - we’ve also spoken with some groups in the nonprofit sector who have - or are looking to - develop ‘market-like’ mechanisms. For example, one such group is Altruistiq (see below) who are looking to build on earlier ideas of nonprofit exchanges. These earlier versions of “social stock exchanges” - which incude Bovespa and SASIX - were in reality online marketplaces that listed (and vetted to some extent) nonprofit organizations who were seeking grant funding. While these marketplaces did help to increase the visibilty of the nonprofits they listed, address some concerns about legitimacy, and bring new donors to the markets - the ‘investors’ were really donors who were giving through a new channel. There was no true exchange of stock or ‘equity’ in an organization - but rather an exchange of ‘value’ (donor funds for nonprofit achievements towards its missions)

In developing its exchange platform, Altrustiq is thinking through challenges such as how to create an added value to ‘owning’ a share in a nonprofit - as opposed to just donating in a traditional way (another challenge it is debating is creating liquidity, but more on that later…)

To this idea of the added value of owning a ’stock’ in a nonprofit - there are some real thoughtful people investigating ways to change the beneficiary-grantee dynamic and move towards an ‘exchange of value’ dynamic - which is at the heart of any exchange. On this topic, I had an interesting conversation with Paul Fordham of the nonprofit group Homeward Bound about a unique “IPO” campaign they have been running (Paul also sent me some great collateral materials on the program - including a copy of an IPO share certificate).

For Homeward Bound, IPO represents an “immediate public opportunity” to end homelessness - and it was launched as part of their capital campaign in 2007 (Warren Buffet was one of their first investors). While clearly in some ways it is a creative ‘twist’ on traditional fundraising - I think it also demonstrates this idea of communicating in a meaningful way to donors an “exchange of value”. Homeward bound developed some interesting metrics on the ROI for puchaasing one of their IPOs - with returns defined for the organization, its beneficiaries - and the donors themselves (things like special event invites, PR, etc..) - AND - specific “shareholder reports” on metrics achieved…

Interesting model… more at www.ipohomeward.com

Another Social Stock Exchange in Development: Green SX

In case you missed one of the comments below, we recently heard from a team developing a social stock exchange - called the Green Stock Exchange (GREENSX) http://greensx.com - which plans to launch and begin trading in the summer of 2008. The Green Stock Exchange will trade shares in social businesses - defined as “a business that makes a profit, but benefits society as well: they have a triple bottom line (economic + social + environmental)”. Since all the listed companies on the exchange are pre-screened, evaluated, and audited according to social and sustainable guidelines set by the exchange, it will make it much easier for green investors to find and support social businesses. The GREENSX will provide opportunities for small green Issuers to access public equity capital efficiently, while providing early stage investors, angel investors, and venture capitalists with greater liquidity. GREENSX will also include an eBAY.com trading system for carbon credits. It is still in the beta stage testing… Feel free to check it out at http://greensx.com.

Rockefeller Supports Another Exchange Effort: SSE London

It’s official. Announced this past Friday afternoon at the 2008 Skoll World Forum - the Rockefeller Foundation will be investing $500,000 USD in support of studying the feasibility of a social stock exchange. If the appropriate demand and support are identified - the hope is to launch an exchange next year. Pradeep Jethi, formerly of the London Stock Exchange, will head up the research efforts. If developed, the social stock exchange would resemble a small market, listing social businesses with as little as $1MM annual turnover and two years’ trading history. This latest investment builds on increasing dialogue with the UKK governement and Third Sector UK in support of financial innocvations (see below). It also specifically builds upon Rockefeller’s previous announcement to support the development of the BX public stock exchange by US based B Corporation. Both initiatives are a part of Rockefeller’s Impact Investing Collaborative - which is working to create infrastructure in the social capital markets. Antony Bugg-Levine, managing director at Rockefeller Foundation, joined the SSE team in the announcement at the Skoll World Forum, after sharing his thoughts and strategies on ”impact investing” as part of a panel discussion (which included Mark Campanale, one of the lead architects of the SSE) on performance and impact measurement (more coming on panel discussion).

More UK Rumblings on a Social Stock Exchange

The UK is certainly ramping up its support for social enterprises. Gordon Brown recently annouced the establishment of a $20MM risk fund as part of a wider effort by the government to encourage social enterprises. Other activities include helping social enterprises compete more effectively for the (approx) $310BB annual spend on goods and services by the UK goverment - and supporting a new bank for social enterprises which would be initially funded from dormant bank accounts (see the task force 2007 report on establishing a social investment bank). Further, the minister for the Third Sector again repeated his support for a new social stock exchange for larger social enterprises (such as Divine Chocolate and Cafe Direct).

open money

An event in Mexico City next week put on by this guy sent to me by Melanie Swan.

BLAB and the BX Public Stock Exchange for B Corporations

Continuing good news in social capital markets developments. The Rockefeller Foundation - through its Impact Investing initiative (which is working to help facilitate the necessary infrastructure to develop more scalable, efficient social capital markets) - recently announced a grant in support of B Lab (B Lab in the nonprofit organization supporting B Corporations - see previous discussions of B Lab below). As Antony Bugg-Levine, Managing Director at the Rockefeller Foundation describes: “B Corporations are an excellent synthesis of the best innovative thinking of how enterprises can be better organized for both financial return on investment and greater transparency and accountability for social and environmental outcomes.” Jay Coen Gilbert, one of the founders of B Lab notes that in addition to grant funding, Rockefeller has also introduced them to like-minded partners -such as the UK-based Social Stock Exchange (SSE) team headed by Mark Campanale and Pradeep Jethi - with whom they are working on the development of a public stock exchange of B Corporations (read the full article here).

Xigi.net Launches First Social Capital Index

Realizing that the Social Capital Market has reached a point its own index is needed - the folks at xigi.net have just launched the Social Capital Index which will track investments in the social capital market - including social enterprise, (health, education and workforce development) fair trade, digital inclusion, and some of the clean tech and microfinance investments. The index will help investors and entrepreneurs keep up-to-date on what is happening in this market - and it will create a place where both buyers and sellers can access research on competition and comparable investments. As the xigi team states - these emerging markets need a research hub to help people get smarter faster. The SoCap Index has three parts, including an asset class fan that ranges from debt to equity to strategic grants - and a fund matrix which describes some of the funds in the Social Capital Market. Over time the goal is that the SoCap Index will create context so investors can discover potential co-investors - and entrepreneurs can find investors and partners. Another goals is that the SoCap Index will reach enough of a critical mass of investment information that it will become a reliable, objective, third party validator of the social capital market’s growth, trajectory, variety and market size. Kudos to the xigi folks (one of whom is Kevin Jones - our collaborator on the xchangexchange) for this important next step

Analysis of Online Marketplaces Opens Dialogue on Key Questions

Keystone - a UK based consultancy led by David Bonbright - has just launched a new report entitled: ‘Online Philanthropy Markets: from ‘Feel-Good’ Giving to Effective Social Investing’? (Iam including here their own description, although have also read it through). This report examines the rapidly expanding phenomenon of online philanthropy markets and includes online platforms like GlobalGiving, Kiva, Network for Good, GiveIndia, HelpArgentina, and many more. The Keystone study finds that online philanthropy markets are relentless innovators, and they believe that some of these innovations are indeed helping to advance longstanding gaps in the performance of nonprofit organizations (such as accountability to beneficiaries and other constituents).

That said - the report also notes that there is still a long way to go - as many of the current online marketplaces still promote a traditional ‘feel-good giving’ approach to philanthropy - while marketplaces that attempt to cultivate a ‘social investment’ mentality among their users still remain a minority. Part of the challenge in cultivating an ‘investment mentality’ is that well-defined criteria for assessing the performance and impact of the organizations listed in the marketplaces remains scarce - and in general the information available in these marketplaces to donors and other social investors falls far short of any acceptable standard of systemization. The December 2007 issue of Alliance magazine actually discussed some of these challenges as well - and David Bonbright of Keystone published an interesting piece on measuring impact “What Do we Need to Know” in that issue.

Overall, through the analysis and recommendations in this study, Keystone hopes to encourage a field-wide dialogue about how to achieve the transformative potential of online philanthropy markets and about how to use innovative online tools to create the informational basis for effective social investments. They welcome feedback and comments on their website where you can download the report! Good questions and a good read!