UK ‘social stock exchange’ takes next step as Big Society fund shares out £3.1m from dormant bank accounts

A UK-based ‘social stock exchange’ is one of four projects to share £3.1m from dormant bank accounts.

Nick Hurd, Minister for the Civil Society announced today that the Big Society Investment Fund, has agreed to invest £850,000 in the stock exchange, which will improve access to capital for social entrepreneurs.

There will also be £1m for FranchisingWorks, which will help long-term unemployed people to set up their own franchise business, and £500,000 to help Triodos Bank set up a new ‘payment by results’ initiative to improve educational, training and work outcomes for vulnerable young people in Merseyside.

The fourth investment is £750,000 in the Community Generation Fund, run by Finance South East, which will set up an initiative to create community owned social enterprises within deprived communities which offer affordable, green energy and reinvest profits in the neighbourhood.

Minister Nick Hurd said: ‘This is about putting money that has been lying around dormant in bank accounts for years to good use in projects that will benefit our local communities and social entrepreneurs.

‘These investments will bring real changes to people’s lives. They will help young people into jobs and give the long-term unemployed the opportunity to set up their own businesses.

‘The Big Society Investment Fund, under the auspices of the Big Lottery Fund, is doing a fantastic job forging the way. Already, their investment decisions show the range of exciting projects that just need financial backing to get going.’

The Social Stock Exchange has enjoyed a long gestation period. Back in March 2008, the Rockefeller Foundation announced a £252,000 investment to finance a feasibility study into the project. Led by Pradeep Jethi, a former new product development manager at the London Stock Exchange, and Mark Campanale , a former fund manager, it was reported back in March 2011 that the pair has raised well over £1m towards their plans.

Like Big Society Capital, which has just received the go-ahead from the European Commission and began life as an idea for a ‘social investment bank’, the stock exchange finally looks near to becoming a reality.

The Cabinet Office statement announcing the funds claimed it would be “the world’s first stock exchange for social enterprises”. However, initiatives describing themselves as social stock exchanges do already exist.

The Bolsa de Valores Sociais (BVS) is a Social Stock Market in Brazil founded by Ashoka fellow Celso Grecco, and operates within Brazil’s largest stock exchange. 

In October 2011, another Ashoka entrepreneur, Tamzin Ractliffe, CEO of NeXii, announced the launch of the iX, which claimed to be the world’s first impact investing exchange board, in partnership with the Stock Exchange of Mauritius. This could be seen as a competitor to the UK social stock exchange, since the Mauritius exchange is a full-fledged member of the World Federation of Exchanges, and a recognised Stock Exchange by Her Majesty’s Revenue and Customs in the UK, and can trade in US Dollars, Euros or British Pounds.

The Big Society Investment Fund was set up by the Big Lottery Fund under the Dormant Accounts Act to make early investments prior to the establishment of Big Society Capital (previously known as the Big Society Bank).

Today’s announcement follows the first in-principle investment, announced in July, of up to £1m in a social investment fund run by the Private Equity Foundation to help disadvantaged young people into employment, education or training. 

John Kingston, chair of the investment committee who agreed the fund, said: “We’ve been impressed by the strength of the deal-flow under the Big Society Investment Fund. And I'm confident we'll be approving more investments in early 2012, to help build and grow the social investment market here in the UK.”

Nick O’Donohoe, Chief Executive of Big Society Capital, said: “I am very excited by the breadth of ideas and the geographic spread of the investments of the Big Society Investment Fund, which bodes well for future financing proposals we hope to see when Big Society Capital opens for business next year.”

The Big Society Investment Fund will consider more proposals at its Investment Committee in February, where it hopes to make further investments. It is envisaged that this will be the final meeting of the Investment Committee as Big Society Capital is on target to be fully operational by the end of the first quarter of 2012.