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Markets with a social mission

After the meltdown on Wall Street, a small group of entrepreneurs is trying to make the market better, stronger and focused on the social good.

The B Corporation boys—Jay Coen Gilbert, left, Andrew Kassoy, crouching, and Bart Houlahan—see the credit crisis as an opportunity for social enterprises.

Photo: Trevor Dixon

By now, doctors and developmental therapists know plenty about how to treat children with cerebral palsy. But all that knowledge doesn’t matter if there’s no one to pass it along, as is often the case in rural hospitals in South Africa. So four years ago, a team of volunteer neurodevelopmental therapists traveled to Malamulele, in northern South Africa, and set up the non-profit organization Malamulele Onward to train the hospital’s rehabilitation staff.

Since that pilot project, Malamulele Onward has sent volunteers to other rural hospitals. But as is the case for many non-profits, there’s too much need and too little money. To expand their reach—and their budget—the volunteers recently listed their project on the South African Social Investment Exchange. SASIX, as it’s called, is a stock market that connects worthy projects like Malamulele Onward with donors. In its first three years, SASIX has brought in $2.2 million for a total of 53 projects. In just two months, Malamulele Onward raised $23,000 to send 20 therapists to southern South Africa. Now its directors hope to tap SASIX to fund expansion into the Eastern Cape.

Not only in Africa, but in North and South America and Europe, “social stock exchanges” are launching to connect donors and investors with non-profits and businesses with a social mission, in the same way traditional markets present businesses and products to investors. Brazil’s Social and Environmental Stock Exchange, which is connected with the Bovespa Index, the traditional São Paolo market, has raised $5.5 million for dozens of civic groups since 2003. On the profit-making end of the spectrum, a pair of London-based entrepreneurs has received a Rockefeller Foundation grant of $360,000 to help start a stock market for “social-purpose” businesses and like-minded investors. Other efforts are underway in India, New Zealand, Portugal and Thailand.

What these efforts share is a commitment to the language and practice of the business sector, a growing trend in the world of social change. “This is a cultural phenomenon,” says Daniel Crisafulli, director of ecosystem investments and partnerships at the Skoll Foundation, a California-based philanthropic organization dedicated to social entrepreneurship. “You have a lot of people coming from business school, or the business sector, and they want to take their knowledge and the language they’re comfortable with and bring it into the social sector.” In the social stock market, companies that incorporate social or environmental missions into their bottom lines meet investors and donors interested in enterprises and non-profits that satisfy business standards.

The language and practices of the business world would take these exchanges into new territory. The best-known social stock exchanges, in Brazil and South Africa, have appropriated the language of markets to facilitate philanthropy—“investing” is the code for “giving.” In the U.S. and U.K., the exchanges are strictly for commercial businesses, with the same financial risks and rewards that shares of any company might offer. But the hope is that creating a separate exchange will attract investors who believe in social missions as much as profit potential.

Neither approach is without its critics. Labeling a philanthropy clearinghouse a “stock exchange” seems more gimmicky than anything else, says Michael Edwards, a scholar at Demos, a non-partisan think tank based in New York and author of Just Another Emperor?, a book about what he calls “philanthrocapitalism.” Worse, it may import the values and conflicts of the for-profit sector. “In the future, will there be anyone left who responds to something other than a market incentive?” he asks. “Where will that leave us?” As for the for-profit equity models, none have been launched yet, though several are projected to be up and running within a year. No one knows if they’ll function. If the economic environment doesn’t improve, the odds of success get smaller.

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