Corporate foundations, political organisations shouldn’t be allowed on SSE: Sebi panel

The expert panel was headed by Harsh Bhanwala, former chairman of Nabard.

The panel said both for-profit and not-for-profit organisations should be allowed to tap the social stock exchange provided they are able to demonstrate that social intent and impact are their primary goals, and that such intent is demonstrated through their focus on eligible social objectives for the underserved or less privileged populations or regions.

“Corporate foundations, political or religious organizations/ activities, professional or trade associations, infrastructure and housing companies (except affordable housing) will not be permitted on SSE,” the report submitted by the Sebi panel said.

The committee said not-for-profit organisations (NPO) should be registered with social stock exchange before raising funds through it. The move is aimed to inculcate a cultural shift in NPOs to enable them to transition toward a disclosure driven fund raising system, as well to signal the investor community about the primacy of social impact.

Not-for-profit organisations can raise funds through equity, zero coupon zero principal bonds, development impact bonds, social impact fund and donations by investors through mutual funds. For-profit enterprises can raise funds through equity, debt, development impact bonds and social venture funds.

The panel has also suggested setting up a capacity building fund with a corpus of Rs 100 crore, to be housed in NABARD. It said exchanges, development agencies such as SIDBI, CSR funds should be allowed to contribute towards the fund. The fund should be governed through an advisory board.

The 16-member committee also said reputed firms having expertise in the area of social audit should be allowed to carry out social audits.

“Social auditors will be required to be empanelled with an SRO (self-regulatory organisation) which is proposed to be under ICAI as a separate Sustainability Directorate,” the Sebi report said.

The regulator has sought views by June 20.