Toolkit for Not-for-Profit Organisations Navigating the Social Stock Exchange

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In her 2019 budget speech, Finance Minister Nirmala Sitharaman introduced the Social Stock Exchange initiative, which has since attracted considerable attention in the development sphere.
Designed to foster inclusivity and adaptability within capital markets, India launched its Social Stock Exchange, the fourth functioning exchange in the world.

In February 2023, SSE achieved a noteworthy milestone with formal approval from SEBI, establishing its position as a regulated entity. It is now integrated into both the NSE and BSE, providing a regulated platform for socially responsible investment initiatives.

The Social Stock Exchange challenges the issue of inconsistent funding and transparency, by connecting Not-for-Profit Organisations (NPOs) with socially conscious investors through various financial instruments.
The exchange serves as a centralised hub for channelling resources to social enterprises and fostering impactful development initiatives. This is facilitated by deploying consistent funding frameworks, diversifying funding sources, and enhancing impact measurement, disclosure, and reporting practices. Through promoting transparency, the exchange cultivates a disclosure-driven ecosystem, guiding stakeholders towards mutual progress. Registering and listing on this exchange can be an intimidating process.

This toolkit aims to equip NPOs with the essential knowledge and resources to navigate the SSE framework through a step-by-step approach.
Leveraging insights from Unnati Foundation, the first NPO to get listed on the SSE platform, we segment the NPO’s journey from registration to successful listing into four phases. Each phase aids in understanding compliance requirements, forging partnerships, and embracing best practices.

NPOs meeting eligibility criteria can register at SSE(s). While registered entities can choose whether to get listed, listing requires mandatory registration.

Involves understanding various instruments, minimum subscription amounts, and offering methods, as well as ensuring preparedness before listing. This includes hygiene checks like document preparation, onboarding intermediaries, and filing the Draft Fund-raising Document (DFRD) to SSE(s).

The SSE(s) review applications and the Updated Fund-raising Document, granting in-principle approval for listing. Upon receiving SSE approval, NPOs collaborate with designated intermediaries for the listing process. The issue opens for a set period, followed by allotment of the instrument.

Once the issue reaches the minimum subscription amount, the project commences. Post-listing involves NPOs to be mindful of the ongoing requirements and ensure periodic disclosures with assistance from the Social Impact Assessor.

NPOs can glean some of the best practices from Unnati’s journey, serving as a starting point for future entries and instilling preparedness towards the efficient use of the SSE.

Understand the SSE Landscape Thoroughly and Engage in Self-Reflection on Readiness: NPOs must prioritise thorough feasibility assessments, evaluating their preparedness to meet stringent SSE compliance requirements and navigate regulatory complexities.
Clear Dues Timely and Be Cognisant of Third-Party Interventions: It is very important to clear tax or notice dues that the NPO might have as soon as possible. NPOs should also be mindful of the scrutiny of parties related to them that can be undertaken.
Be Open to Collaboration: Unnati’s journey highlights the invaluable role of partnering with experts and intermediaries from onboarding to regulatory navigation. Active engagement with the SSE Council, known for responsiveness and support, facilitates a smoother integration process.
Develop a Funder Pipeline Prior to Listing: One of the reasons for Unnati’s success stemmed from targeted outreach to diverse investor segments, including high-net-worth individuals and philanthropists. NPOs should proactively initiate conversations with funders and not wait until the listing begins.
Committed and Proactive Leadership: Active involvement of key decision-makers at every strategic step is essential for SSE participation. Their time commitment ensures strategic oversight and timely decision-making, contributing to the organisation’s seamless onboarding on the platform.

Authors: Shreya Singh, Shruti Tripathi and Palagati Lekhya Reddy (Sattva Knowledge Institute) with inputs from Ramesh Swamy and V Suryanarayanan (SGBS Unnati Foundation).

NB: This toolkit is a living document, and will continue to be updated with developments in the space.

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