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Corporate, political outfits can’t list on Social SE

Our Bureau Mumbai | Updated on May 07, 2021

SEBI panel lists norms, funding modes and eligible entities

Fund-raising by organisations working towards eradicating hunger, poverty, malnutrition or promoting health care, sanitation, safe drinking water and education in India is set to get easier.

On Thursday, the Securities and Exchange Board of India (SEBI) unveiled the recommendations of a committee it had set-up to propose norms for listing on a Social Stock Exchange (SSE), a novel concept for social work announced by the Finance Minister in her Budget speech.

A non-profit organisation (NPO) and a for-profit enterprise (FPE) can list on the SSE provided they can demonstrate social intent and impact. But the panel, led by Harsh Bhanwala, former Nabard Chairman, has recommended keeping out corporate foundations, political or religious activities, professional or trade associations, infrastructure and housing companies (except affordable housing) of the SSE.

Fund raising modes

The fund-raising modes on the SSE include equity, debt, development impact bonds and social venture funds. It has been proposed to allow development impact bonds and social impact funds, currently known as social venture funds (SVFs), with 100 per cent grants-in grants-out provision and donations by investors through mutual funds.

To boost investor participation in the SVFs, the panel recommended that the minimum corpus size for such funds should be reduced from ₹20 crore to ₹5 crore and the minimum subscription amount from ₹1 crore to ₹2 lakh. The SVF will fall under Category-I Alternative Investment Fund (AIF) and allow 100 per cent grants-in and grants-out.

The Technical Group has recommended that the capacity building fund for SSE should have a corpus of ₹100 crore. This fund should be housed under Nabard. Exchanges and other developmental agencies such as SIDBI should be asked to contribute towards this fund.

The SEBI panel has laid emphasis on disclosures for entities using the SSE mechanism. They will have to come out with social impact reports annually, covering aspects such as strategic intent and planning, approach, and impact score card. The report lists a broad set of activities that SSE-listed entities can engage in, based on those identified by NITI Aayog under Sustainable Development Goals.

Eligible entities

The list of entities eligible to list on the SSE include those promoting education, employability and livelihood, gender equality, empowerment of women and LGBT communities.

Organisations ensuring environmental sustainability, addressing climate change (mitigation and adaptation), forest and wildlife conservation, protection of national heritage, art and culture, training to promote rural sports, nationally recognised sports, paralympic, sports and Olympic sports are also eligible. As also supporting incubators of social enterprises, supporting other platforms that strengthen the non-profit ecosystem in fund raising and capacity building, promoting livelihoods for rural and urban poor, including enhancing income of small and marginal farmers and workers in the non-farm sector.

Slum area development, affordable housing, and other interventions to build sustainable and resilient cities, disaster management including relief, rehabilitation and reconstruction too qualify.

Published on May 06, 2021

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