Developing a social equity capital market



par Jessica Brown, Mark Campanale, New Economics Foundation, Charities Aid Foundation (CAF), 2006
Langue : anglais

The rise of social entrepreneurship has resulted in an increasing number of businesses seeking to maximise both social and financial returns. Like traditional businesses, social enterprises need equity capital to grow and achieve their strategic objectives. This report, written by Jessica Brown, New Economics Foundation head of Access to Finance, and Mark Campanale, indicates that traditional equity markets pose a challenge to many social purpose businesses because of their single-minded focus on profit maximisation, short term perspective, and speculative nature, which does not value social outcomes.

The experience of Body Shop, Ben & Jerry’s, and Green & Blacks suggest that social purpose businesses may be in danger of losing social mission once they enter mainstream financial markets or sell out to a large firm. And, most socially responsibly investment (SRI) funds invest primarily in FTSE 350 companies, and are limited in the extent to which they can invest in unlisted social purpose businesses.

The report says that a new mechanism to raise equity finance for social purpose businesses would enable a greater number to make public offerings without the risk of compromising their social mission in favour of profit. A process for intermediating between supply and demand for equity capital could also enable charitable foundations, SRI funds and socially-minded investors to enhance their investment portfolio, and function to channel sufficient private capital to the social sector.

Sources

Brown, Jessica, and Mark Campanale. 2006. Developing a social equity capital market. London: Charities Aid Foundation, and New Economics Foundation.