SVE: Social Ventures Go Mainstream
Canada officially gave notice to the UN that it was terminating its obligations under the Kyoto protocol. There is a complicated mix of political and economic reasons, but at the end of the day Canada was not in position to meet its greenhouse emission reduction targets. That being said, we are at the forefront of trying to make socially conscious investing more mainstream. Traditionally the best way to access capital has been through the public markets. The TSX has officially gone to the Ontario Securities Exchange Commission to obtain permission to start Canada’s first Social Venture Exchange (SVX). Additional details can be found on www.thesvx.org. The mechanics of the fund are similar to those of traditional companies listed on the TSX.
Presently the SVX is looking for companies with revenues under the $25M with a specific mission that includes nonprofits, co-operatives and social purpose businesses. Subject entities need to have proven revenues and must be exclusively focused on social causes. Financing in the SVX is limited to $10M and can be in the form of debt or equity. Approval for the exchange has been delayed as they had planned to be operational by the summer of 2011. It appears that the exchange will be operational by 2012.
While there is significant cause for celebration, in my opinion the SVX doesn’t go far enough. The only manner in which social investing becomes a game changer is when we value profits in the same capacity as societal benefit. We have to ask ourselves why there is a separate public market mechanism for social ventures. In my opinion the reasons for this difference is due to the fact that we are yet to establish a mechanism with which to value societal change. It seems that feeling good is a lot tough to measure.
Details on the SVX are still being ironed out, but it appears that success in an entity is defined as meeting a specific goal or objective. For example a non-profit that is focused on providing water in Africa will have a specific goal of service 5000 people. While this is a noble goal, how do we compare it with another entity that provides AIDS drugs to poor parts of the world? It is difficult to measure which of these entities has been more successful than the other. In traditional capital markets we can evaluate companies based on their profitability and the type of business is irrelevant. What if we take social venture investing to the next level? Instead of stopping at a set goal, we can measure the economic impacts of providing water in a community. Providing water in a community will increase agriculture and thus develop an economy. The entity catering to AIDS patients we can measure the incomes of individuals after their treatments. Measuring the economic benefits of our social ventures will give the market a common metric with which to evaluate different entities.
Written by: Sam Perera, Financial Savant
Great article Sammy! A common metric that measures economic benefit sounds like a good way to go!