The Social Stock Exchange has been a long time coming, and its arrival is something of a landmark. The concept was floated in the early part of the last decade, and I have always supported the idea because of the rigour it could bring to thinking about social investment.
It has not been easy to grapple with the 'social financial' language, however attractive it is, and what it means when the word social is added to financial terms such as asset class, return, investment, capital, equity and business. We all think in a vague sense that we know the meaning of those words, but do we know what they precisely mean? Even 'social enterprise', which has the greatest currency of all these terms, is still slippery. It is not an organisational form as such, and Social Enterprise UK says they come in all shapes and sizes. But the balance that needs to be achieved between social and financial targets to qualify as a social enterprise is still a pretty grey area.
The launch of the SSE and the publication of the government's 2013 Progress Update on the social investment market brings important clarity. As Nick Hurd writes: 'pioneering investors and intermediaries are looking for a blend of financial return and social impact'.
Whatever else social businesses do, financial return is a key component. The SSE lists businesses that are on a regulated stock exchange, generate robust financial returns and have social aims. And it is heartening to see successful companies whose purposes have significant environmental, cultural and social relevance so strongly profiled. But who are the main stakeholders?
The SSE provides a powerful rallying cry to the business sector about the way it does business, promoting an accessible and regulated platform of public information for investors about businesses with environmental and social concerns. It sends a message that there are huge opportunities for business success in areas of social purpose, and if this goes to scale and pulls in major companies, it could generate significant social change. Instead of funding charities to plant trees and preserve forests, we promote businesses that don't cut them down in the first place.
To the voluntary sector, however, it sends a message that social missions can be profitable if you learn how to do business and are ambitious. The movement of business into the social space will sharpen the challenges that charities face. To attract funds from anyone who wants to maximise their impact, they will need to compete with a growing business sector in financial as well as social returns, which will be difficult; or they will need to demonstrate how the social value they bring outweighs considerations of financial return - equally difficult. There are indeed areas where the 'social' and 'financial' can be comfortably blended, but there are many where they cannot, and the sector will need to be clear about where the choices between the two need to be made.
Cathy Pharoah is professor of charity funding at Cass Business School