Mark Campanale

Chair, CAF/nef Social Enterprise Investment Steering Group

Founder, The Social Stock Exchange

November 2007

Towards a Social Stock Exchange

Social capital markets

Social business sector requires capital to expand & develop

Traditional capital markets not best designed to meet these needs

Social investment space is captured by socially responsible investment funds – but they do not invest in social purpose business/social enterprise sector

Foundations/charity sector will not finance social purpose businesses (except through grants)

Social Stock Exchange?

“It is now beyond urgent that we create a new social financial services sector” Bill Drayton, Ashoka

Summary

Natural Capital Institute

“The term socially responsible is so broad it is meaningless”

Coca Cola held by 56 SRI funds including Green Century Equity Fund Wal-Mart held by 33 SRI funds including Ethical Global Equity Fund Altria (Formerly Phillip Morris) held by 12 SRI funds including Eco

Growth Fund (Mrs Green) Halliburton held by 23 SRI funds Macdonalds held by 41 SRI Funds ExxonMobil held by 40 SRI Funds including ABF Green Planet Fund Living Planet Fund (WWF) holds BP, Shell, Barclays

Source: Commonground Magazine, 2003 + Natural Capital Institute

Language of social investment captured to describe a CSR strategy

SOCIAL COMMERCIALCharity Trading arm of charity

Social purpose business

Socially responsible

business

Business

Source: John Kingston, Venturesome

55,000 social enterprises in the UK Generating £27 billion in turnover, £8 billion to GDP 3,000 with turnover > £1 million Social & environmental listed businesses – over 150 on AIM/Plus Some £6 billion invested through SRI funds, £50 billion held by

foundations in reserves

Social enterprise

Meeting the funding needs of social enterprises

Challenges Facing Social Enterprises

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10

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80

Accessing Capital Promoting/Marketing

Maturing/Professionalzing Rrecruiting talent

Adapting to landscape Other

Respondents select the top two challenges they face in growing their organisations, N=109

Source: Growing Opportunity: Entrepreneurial Solutions to Insoluble Problems, Skoll Foundation/Sustainability 2007

Accessing Capital is No.1 Issue, Skoll Foundation 2007

The Equity Investment Gap

Addressing the Equity Gap

Grant Venture philanthropy

Patient capital

Bank loan

Quasi equity

Social equity offering

Social enterprises are likely to require equity finance as they evolve

“There is a lot of seed capital available, angel-equivalent, for social entrepreneurs. But there is not a lot of later-stage funding available to take social entrepreneurs to scale. There a huge gap in the social capital market that’s preventing many of the best models from replicating and fulfilling their potential.” Linda Rottenberg, Endeavour Global (Skoll Foundation/Sustainability 2007)

Social mission?

Lack of capital routes for expansion or exit?

So what are the main financial challenges?

Square pegs: social entrepreneurs don’t fit the existing system

Lack of consistent, flexible, and long-term financing Innovation capital (unrestricted donations) Angel investors Funding from unusual foundations (but duration still too short) Private investment funds (5 years then exit)

Lack of knowledge about – and access to – capital markets Sustainable sources of financing bring their own challenges

– how does it affect ‘mission?’

“Strong sense that social entrepreneurs could benefit from increased knowledge about the best financing options, as well as better access to open-minded financiers.”

Source: Growing Opportunity: Entreprenereurial Solections to Insoluable Problems, Skoll Foundation/Sustainability 2007

Preferred sources of financing

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Foundations Sales/Fees Fundraising Government

Venture capital Help-in-kind Joint venturing Other

Franchising Own pockets Going public

Respondents select their preferred sources of financing, N=109

Source: Growing Opportunity: Entreprenereurial Solections to Insoluable Problems, Skoll Foundation/Sustainability 2007, p.18

Philanthropy, not investment capital, Skoll Foundation 2007

Want foundation grants

But can make fees

Will take venture capital

Not ready to go public

IPO’s and Market listings

Survey reveals a great deal of “unease about the implications and constraints” of the public market

“Capital markets blatantly inefficient. There is no mechanism that has the efficiency of the private sector (Nasdaq), private placements, VC) when it comes to raising large amounts of capital” – John Wood, Founder & CEO of Room to Read

39% of respondents cited Venture Capital as source of funding But may misunderstand what it means One survey respondent even spoke of ‘venture capital gifts.’

Source: Growing Opportunity: Entreprenereurial Solections to Insoluable Problems, Skoll Foundation/Sustainability 2007

Accessing Capital is No1 Issue, Skoll Foundation 2007

The Equity Investment Gap

Companies rooted in the social enterprise sector have successfully listed on AIM or Plus Markets Plc, examples: Freeplay plc Parry People Movers Monkton Group (Good Energy)

Social purpose businesses widely list on the public markets CareTech plc Stagecoach Theatre plc Debt Free Direct plc

Existing exchanges such as Plus Markets, AIM and ShareMark are geared to small/medium sized companies raising £1-4 million

Clear evidence of a successful record of equity raising through the public markets

Social enterprises and the public markets

Future

Is there a translation issue – do current markets meet the needs of social enterprises?

Can social investors easily find social investments? Is the regulatory framework favourable to social investors

and social enterprises? Is better sign-posting required?

Introduction to Social Stock Exchange

Social Stock Exchange’s goal is to deliver an FSA regulated and duly authorised investment market place appropriate to the needs of investors

Social Stock Exchange will explicitly reflect the social mission of enterprises, whilst being comfortable to the needs of investors

Consortium will build action research that helps bring social enterprises together with investors

The project will help signpost social investors to social enterprises, enabling equity capital to be raised

Summary of objectives

Education: York UniversityBA (Hons) Politics and Economic History

Wye Agricultural College, London UniversityMSc Agricultural Economics

Career:

1985 Environmental ConsultantEC, ERM, World Vision, Band Aid/Live Aid

1989 Jupiter Asset ManagementSenior Sustainability Investment Analyst

1994 NPI Asset Management LtdSenior Sustainability Investment Analyst

Mark Campanale

1999 Henderson Global InvestorsSRI Business Development

2001-2007 Henderson Global InvestorsAssociate Director of SRI Business

Development

2007 London Bridge CapitalInvestment Manager, Listed Assets

DirectorshipsDirector, Carbon Assets FundCarbon Capital Markets

Director, UK Social Investment Forum

Founder, The Social Stock Exchange

Contact: mark@campanale.co.uk

07714 415262