Monday, October 1, 2012
Social impact investors and Boards
Social impact investors put their investment 'dollars' to work for an educational, environmental, social and essentially public good purpose. Social stock exchanges and boards brings those investors to socially conscious businesses that want to raise capital.
In addition to the recently started but not yet LIVE Social Stock Exchange in London, another social investment board has launched. In partnership with the Stock Exchange of Mauritius, the iX, or Impact Exchange has launched a board to help companies who have a social purpose, and not simply a profitable purpose, to raise cash.
All of this raises the issue of who qualifies as a social company and how do we know once we buy shares that they will remain social? Oh, they are waaaay ahead of us. There are verification agents and audits, as well as ongoing reporting requirements.
This is not a new concept. Companies can do green audits, why not social audits. Of course, these are an additional cost. We pay more for organic, locally grown, specially made healthy for us and society goods. Being socially, environmentally conscious costs more. Some companies can afford that additional cost to attract that impact investor. Some companies cannot.
Here is where I get stuck. Anecdotally, its the small to medium enterprise from the developing world who cannot afford those additional costs to be green and responsible. Here is the kicker, the founders of iX plan to ask development agencies to assist them in defraying the costs of some of these audits. What do the economists call this...rent seeking? I hope I got that right. It is just another layer of cost and bureaucracy, job security for some, and all acceptable because we are investing in a sustainable future.
These ideas and concepts are not harmless. Exchanges make money and impact investors cannot get around that. Also, impact investors should be responsible for the companies they put OUT of business in favor of others that can afford the audit, impact verification and reporting requirements.
Any data driven researcher out there that wants to help me find the proof please call me!