UK Prime Minister launches Social Stock Exchange, tax breaks and £250m community asset promise
London, UK – Prime Minister David Cameron today announced the launch of the Social Stock Exchange (SSE), a tax break consultation for social investors and £250m to help communities buy local shops, pubs and playing fields. The Prime Minister announced the three initiatives in a speech at today's Social Impact Investment Conference, ahead of the G8 summit.
Cameron told delegates: 'I am absolutely delighted that today the London Stock Exchange is supporting the launch of the world’s first Social Stock Exchange, an online portal that will become the first information platform on the planet to showcase publicly listed social impact businesses. The market capitalisation of the first 12 Social impact businesses launching on the Social Stock Exchange today is already £500m. The next 13 businesses set to join in October will add another £700m. And this is just the beginning. For years the London Stock Exchange has made London the home for private finance, today London can cement its place as the home for social finance too.'
The Prime Minister said he wanted to make social investment not only a success in Britain but to 'sell it all over the world'. He said: 'Businesses need finance to grow and make profit. Governments need finance to fund big infrastructure projects. That’s why we have banks, bonds, investment markets and all the rest. The idea here is just as simple and just as powerful. Social enterprises, charities and voluntary bodies have the knowledge, human touch and personal commitment to succeed where governments often fail. But they need finance too. They can get it from socially minded investors. So we need social investment markets, social investment bonds and social investment banks.'
Cameron said the government had to help. 'Government needs to be more creative and innovative – saying to social entrepreneurs: “If you can solve the problem we’ll give you money.” As soon as government says that, social entrepreneurs can go out and raise capital. So that is exactly what the British government has been saying. And I am proud that Britain has led the way from the outset. We have created the first social impact bond – with more of these bonds in the UK today than in the rest of the world put together. We had the first charity bond too. And last year, I think our proudest creation yet, the first ever wholesale social investment bank - Big Society Capital.'
Announcing the new measures, Cameron said Big Society Capital and the Big Lottery Fund were 'making a long-term commitment to provide a quarter of a billion pounds over the rest of this decade to help communities with ambitions to own local assets like pubs, shops, community centres and affordable housing.' As part of this longer-term commitment, Big Society Capital and the Big Lottery Fund are developing a £50m Community Assets Fund that will provide a blend of grants and loans to help communities through the phases of local ownership. This will start making payments from next year.
Cameron explained: 'Everyone knows how vital institutions in our towns and villages are, like village halls, playing fields, local pubs. And everyone knows how – despite the best efforts of parish and local councils – these can face closure. I want our social investment funds to give people the opportunity to take them over and run them. 'This isn’t some pipe dream,' the Prime Minister added. 'Already there are 311 community-owned shops,18 community-owned pubs, as well as community owned bookshops, cafes, swimming pools, bakers, famers markets, even community owned broadband networks.'
On tax breaks, Cameron launched a consultation on the Social Investment Tax Relief promised in the Chancellor's Budget. He said: 'If we want people to take on the risk of an investment, we need to reward them and help their investment to become self-sustaining. We’ve done that for venture capital, it is time to do the same for social capital too.' He told delegates: 'Social investment can no longer be the poor relation. I want you to help us shape an effective tax incentive that mirrors many of the features of the successful tax advantaged venture capital schemes. Big Society Capital tell us that tax reliefs could generate an extra half a billion pounds in social investments over the next five years. And I am determined that we should see the benefits of that.'
Cameron said the launch of the Social Stock Exchange showed the UK was at the heart of financial innovation and social investment. The global market for social impact investment is estimated to be worth $9bn and expected to grow to between $200bn and $650bn in the next decade.
The first member companies to be admitted to the SSE are high growth businesses in markets such as social and affordable housing, clean-tech, waste, water, recycling, renewable energy, sustainable transport, health, education and culture. They include Ashley House plc, V22 plc, Straight plc, Scope, Places for People, ITM Power plc, ValiRx plc, Good Energy Group plc, Primary Health Properties plc, Halosource plc and Accsys Technologies plc.
A further 12 companies are currently pending admission, following the SSE’s rigorous three stage admissions process, which includes the requirement to be admitted to a regulated Stock Exchange (hence the role of London Stock Exchange Group in supporting this initiative), the production of an Impact Report and assessment by the SSE’s Admissions Panel, formed of leading social impact investment experts. The SSE is supported by a number of high profile organisations including London Stock Exchange Group, City of London Corporation, Big Society Capital and the Rockefeller Foundation.
Pradeep Jethi, the SSE's co-founder and CEO, said: 'We believe that organisations that place social and environmental aims at the core of their activities, whilst operating on robust revenue and growth models, are the ones best equipped to generate the kind of positive impact that creates real change. Nobody can guarantee a return on capital – but the SSE can guarantee the social benefit and standards of each and every company they admit.' Xavier Rolet, CEO of the London Stock Exchange Group, said: 'London Stock Exchange Group supports the Social Stock Exchange in order to provide entrepreneurial and growth companies increased visibility within the social sector and access to a wider pool of engaged investors.'
Big Society Capital’s CEO, Nick O’Donohoe, said: 'As a key investor into the Social Stock Exchange, Big Society Capital is fully supportive of this ground-breaking initiative that is integral to the future growth of the global social impact investment market. Today’s Social Impact Investment Forum places the UK at the centre of social investment innovation, with the SSE forming a key piece of this new infrastructure. We are delighted to see some truly great companies featured on the newly launched platform and are proud to be a key supporter of the SSE.' Minister for Civil Society Nick Hurd said: 'Around the world investors are looking to do more with their money, and ensure it has a positive social impact. Once again Britain is leading the way in this field by hosting the world’s first Social Stock Exchange to provide a trusted source of investments that can achieve that impact.'
The Social Stock Exchange is designed to connect publicly listed social impact businesses with investors seeking to generate positive impact alongside a financial return. Its aim is to bridge the information gap between values-based investors and growth businesses that are delivering positive social and environmental impact through their core activities. By doing this the SSE provides investors with the knowledge they need to identify and compare those organisations that deliver demonstrable value to society and the environment. This will allow the social investment market to grow to scale, leading to the creation of more impact. Through its online portal, the SSE gives member companies the opportunity to articulate and evidence their social and environmental impact, whilst giving investors the tools and frameworks necessary to assess the social value generated by the businesses featured.
To qualify for inclusion on the SSE portal, companies will first need to be admitted to a regulated Stock Exchange – hence the involvement of London Stock Exchange Group in supporting this initiative. Companies will then need to comply with separate SSE admissions criteria The Social Stock Exchange’s admissions process includes the publication of an independent Impact Report prepared by specialists in social impact. Applications are reviewed and approved by an independent Admissions Panel, meaning that investors can rely on a sound vetting procedure, based on best practice disclosure. Pradeep Jethi and Mark Campanale are the co-founders of the Social Stock Exchange. Its investors are Big Society Capital, Joseph Rowntree Charitable Trust, and Panahpur.
Commenting on the tax relief, Luke Fletcher, partner at law firm BWB, said: 'HM Treasury have clearly done an enormous amount of thinking already and are asking very good questions. The relief will be for direct investment by individual investors into eligible social enterprises, probably CICs, charities and bencoms. No doubt there will be a lot of debate about how eligible social enterprises are defined, which will probably exercise a few people. I hope we don’t get too hung up on these details, as it is only a definition for the relatively narrow purposes of this particular tax relief.'
He warned: 'The big risk is that efforts to define the boundaries of the relief make it too complicated for individual investors to understand or advisers to recommend. This could happen if the rules around anti-avoidance or State Aid make it difficult to administer or the types of debt instrument which qualify for investment have unusual features that don’t reflect the way in which individual investors actually want to invest. 'The holy grail has to be a simple, easy to understand relief, as take up will then be much greater, but this will be really hard to achieve. Thankfully, there is a long consultation period – it closes on 6 September 2013 – so now the hard graft on the detail starts in earnest.'