SSX_Impact Report_2016

www.socialstockexchange.com

THE WORLD’S ONLY PUBLIC SOCIAL STOCK EXCHANGE

socialstockexchange.com2 3

THE SOCIAL STOCK EXCHANGE PROVIDES ACCESS TO THE WORLD’S FIRST LIVE PUBLIC CAPITAL MARKET EXCLUSIVELY

FOR PROFIT WITH PURPOSE ENTERPRISES.2 socialstockexchange.com 3

IMPACT REPORT 2016


CEO OVERVIEW

35 SOCIAL STOCK EXCHANGE MEMBERS - MORE THAN DOUBLED IN 2015

15 NEW SOCIAL CORPORATE ADVISERS JOINED OUR NEW ADVISORY MEMBERSHIP STREAM IN 2015

£400M PLUS CAPITAL RAISED BY SOCIAL STOCK EXCHANGE MEMBERS

£2.3 BILLION, THE COLLECTIVE VALUE OF THE SOCIAL STOCK EXCHANGE MEMBERSHIP

CERTIFIED B-CORPORATION STATUS GRANTED TO SOCIAL STOCK EXCHANGE, ONE OF THE UK’S FOUNDING B-CORPS

WINNER OF ADVFN AWARD FOR BEST TRADING INNOVATION 2016 AND GUARDIAN SUSTAINABLE BUSINESS AWARD – FINANCE FOR GOOD

3515

£400,000,000

£2,300,000,000

CERTIFIEDB-CORPORATION

AWARDS

4

Welcome to the Social Stock Exchange’s first impact report. Whether you are already familiar with

our mission and our strategy or whether you are learning about us for the first time, I hope you

will find this a useful way to brief yourself on our theory of change and on the impact we seek to

achieve.

Our strategy is to develop and disrupt the conventional capital markets to create a public market in

which pro-social purpose and impact is valued as much as reported financial returns .

• A public market because we believe that systems level change will only be achieved if the

public can participate directly in the market and become impact investors in their own right

and that this possibility will itself encourage both new issuers and institutional managers to

value pro-social purposes as much as conventional financial returns.

• For purpose-driven businesses backed by mission-aligned investors - positive impact not

negative screening

• In which social entrepreneurs can raise capital and also benefit from a secondary market – so

broadening the range and diversity of those who can participate

It follows that our impact is not simply the sum of the impact of our members (although you will

see that reported). Our impact is also the impact we can make in the capital markets to improve

accessibility, participation and ultimately liquidity for pro-social businesses and impact investors.

We hope to continue the progress we have made and report against these objectives in future

reports.

Colin Melvin, Chair of the Social Stock Exchange said:

I am seeing a marked increase in the appetite for responsible and sustainable investing as

mainstream investors wake up to the financial and economic value of strong social impact and

positive corporate purpose. At this exciting time, the Social Stock Exchange provides an excellent

platform for like-minded investors and businesses to connect and create together a more

sustainable economy.

As they change their focus from short-term transactions towards longer-term relationships,

investors are starting to realise their interdependence with the companies in which they invest.

The Social Stock Exchange is at the heart of this change, helping companies and their investors

to understand, articulate and showcase their social impact and purpose. As Chair I am looking

forward to assisting in the further development of the Exchange and its role in the investment and

corporate communities.”

OUR VISION IS A PUBLIC MARKET TO ACHIEVE PROFIT WITH PURPOSE FOR ALL. OUR MISSION IS TO STIMULATE A VIBRANT, REGULATED, PUBLIC SOCIAL INVESTMENT MARKET, ENABLING ALL IMPACT BUSINESSES TO HAVE GREATER ACCESS TO CAPITAL SO THAT INVESTORS BOTH RETAIL AND INSTITUTIONAL CAN IDENTIFY, TRANSACT AND REALISE THEIR SOCIAL, ENVIRONMENTAL AND FINANCIAL GOALS.

IMPACT REPORT 2016


THE SOCIAL STOCK EXCHANGE WAS FOUNDED BY MARK CAMPANALE AND PRADEEP JETHI IN 2007 AND WAS OFFICIALLY LAUNCHED BY THE THEN PRIME MINISTER, DAVID CAMERON, AS PART OF THE G8 SUMMIT HOSTED BY THE UK GOVERNMENT IN JUNE 2013.

THE SOCIAL STOCK EXCHANGE (SSX) is a limited company, incorporated in the United Kingdom,

whose purpose is to promote and develop the impact investment sector and provide investment

opportunities in this sector to all investors. It is headquartered in the City of London and it is

planning to open local offices elsewhere in England to be closer to local communities. It offers

access to funding to impact organisations and a framework for impact assessment through the

Impact Reporting Process which is the key milestone for achieving membership at the Social

Stock Exchange. Furthermore, it raises public awareness around existing solutions to social and

environmental issues which wider society currently faces. It offers access to the world’s first

regulated market dedicated to impact businesses of all sizes and investors, meaning that the SSX

is a platform where accredited member companies can be traded publicly.

At the end of June 2016, the SSX had 36 members’ organisations, of which 14 are publicly listed

securities that can be traded on London Stock Exchange’s Alternative Investment Market (AIM)

and 5 on the Social Stock Exchange segment on Icap’s Securities and Derivatives Exchange (ISDX).

The remaining 18 organisations are private companies whose securities (equity or debt) are not

publicly tradable yet, although they have made a commitment to listing at the appropriate stage

in their development. The total market capitalisation (or valuation for private companies) of the

Social Stock Exchange members is approximately £2.3 bn at the time of writing.

The Social Stock Exchange seeks to develop strategic

partnerships within the City of London and beyond in order

to bring together relevant parties with the right skillsets

to assist issuer members in raising their profile and, where

appropriate, capital. To this end we have developed a

network of Social Company Advisers (SCA’s), consisting of

lawyers, accountants, corporate finance firms, auditors and

brokers); currently there are 15 SCA’s in place. Additionally

we have arrangements with Impact Reporting Specialists

who can assist applicant companies in preparing their

impact reports.

Organisational Summary Board & Management Team

Board | Chaired by Colin Melvin

Chaired by John ElkingtonAdmissions Panel

Tomas Carruthers, CEO

EA to CEO & Events Administrator

Richard Cook, COOPaul Burniston, CFO Debbie Ryan

Director of Partnerships

Laura Meecham Events Assistant

Clément Huret Head of Research

Sara Louise PorterMembership & Events Manager

Jason de AndradeBusiness

Development Manager

Vittoria MannCompliance Manager

THE BOARD of the Social Stock Exchange is chaired by Colin Melvin and also consists of a further four non-executive directors (NED’s) – Deputy Chair James Perry, Stephen Brenninkmeijer, John Elkington of Volans (also Chair of the Independent Admissions Panel) and Gunner Burkhart, Senior Adviser to the Financial Conduct Authority, one executive member (Chief Executive, Tomas Carruthers); Evita Zanuso, of Big Society Capital is also an observer.

All applicants have to pass a rigorous process before admission to the Social Stock Exchange is granted. This is overseen by the Independent Admissions Panel chaired by John Elkington, and in addition to him, consists of a further eight members, with expertise ranging from financial services through to social enterprise and impact investing. It is strategically important to the Social Stock Exchange that the Panel is wholly independent and de-correlated from our commercial goals. The decision to appoint an independent chair was taken at the end of 2014 and John Elkington was appointed in May 2015; he reports to the Board.

G8 SUMMITLONDON

THE SOCIAL STOCK EXCHANGE EMPLOYS A TOTAL OF 10 PEOPLE10

6

PUBLIC PRIVATE

36 MEMBERS

14 22

15 SOCIAL COMPANY ADVISERS

£2,300000,000

TOTAL MARKET CAPITALISATION OF THE SOCIAL STOCK EXCHANGE MEMBERS

IMPACT REPORT 2016


IN FACT, after COP21, and Sustainable Development Goals (SDG)

we are now at a pivotal point in global markets, where a new

kind of stock exchange has the opportunity to accelerate the

way that markets support this change.

The Social Stock Exchange will help to generate genuine

institutional and retail demand in the social/ impact sector

simply by exploiting the existing market infrastructure. Better

yet, working in this way will allow new, as well as existing, retail

investors to access the market.

The Social Stock Exchange’s intention is to disrupt and revitalise

existing capital markets’ operation, creating a new outcome and

a new equilibrium. And we will do this in a cost-effective public

market – one where issuers value impact as much as they value

financial return.

Our disruptive approach will create an infrastructure and give

social entrepreneurs, communities and investors valuable

support - by changing the way markets work to serve society’s

purposes.

Moreover, the Social Stock Exchange will help to unify and

harmonise tools, processes and methodologies in the impact

sector with a view to building a new, global standard for

measuring impact

Commitment to social value

THE GLOBAL LANDSCAPE IS CHANGING AND CORPORATES ARE BEING DRAWN INTO A VERY DIFFERENT WORLD.

Board & Management TeamCONTINUED

THE EXECUTIVE TEAM CONSISTS OF: TOMAS CARRUTHERS - CHIEF EXECUTIVE OFFICER After two successful decades building and growing retail financial services companies - including ESI, which became E*Trade UK and Interactive Investor International plc - Tomás is committed to delivering not only great returns for investors, but a positive social or environmental impact, too.

PAUL BURNISTON – CHIEF FINANCIAL OFFICER Paul has over 25 years of experience in corporate strategy, visioning and finance, driving strategic change, innovation and performance improvement throughout an organization both organically and through M&A transactions. He has a core track record of building businesses in retail financial services, particularly in the online brokerage and online media sectors.

RICHARD COOK – CHIEF OPERATING OFFICER After serving in the Army for thirteen years, Richard began his commercial career at Reuters initially running Lipper’s European data operations before moving to the US to take over global product development and delivery. He then moved on to become Chief Operating Officer at Citywire where he spent 5 years helping grow a forward thinking and innovative, financial media business. After a brief spell with Times Education as their Digital Director, he moved on to become Operations Director for Centaur Media plc. Richard also acts as the secretary to the Admissions Panel.

DEBBIE RYAN – DIRECTOR OF PARTNERSHIPS Debbie started her career in the public sector and spent a successful 20-year period firstly in the Home Office (1987-1995) and then the Prison Service (1995-2007). Whilst in the Prison Service she jointly developed a number of large scale offender employment programmes, the most significant being a £120 million project which became the largest offender employment scheme in Europe.

CLEMENT HURET - HEAD OF RESEARCH Clement Huret is the Head of Research and is a vital link between the business and the Admissions Panel as he works closely with current and prospective members on their impact reporting as well as with the Impact Specialists. Clement has a strong background in financial services and investment banking having spent the last 8 years in positions such as auditor, financial manager and risk analyst. He has 2 MSc in corporate finance and financial engineering and speaks French and Portuguese. He joined the SSX as research analyst and is now part of the business development team.

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IMPACT REPORT 2016


SOCIAL PURPOSE AND CONTEXT

IMPACT INVESTING IS AN APPROACH THAT SEEKS TO ALLOCATE CAPITAL WHERE THERE IS A CLEAR SOCIAL AND ENVIRONMENTAL NEED, THEREBY AIMING TO ACHIEVE A MEASURABLE IMPACT ALONGSIDE A MARKET-COMPARABLE FINANCIAL RETURN.

IMPACT INVESTING is an approach that seeks to allocate capital

where there is a clear social and environmental need, thereby

aiming to achieve a measurable impact alongside a market-

comparable financial return.

This concept is not new, but the sector’s growth has been

accelerating since 2011, with JP Morgan estimating a global

market worth over $60bn in Assets Under Management in 2014,

up 30% from 2013. This sits alongside a remarkably strong

performance of the global market for sustainable and responsible

investments, now worth over $21.4 trillion.

Impact investing seeks to positively include, rather than exclude

investments, therefore opening up a wide array of opportunities

to investors who wish to generate both a social impact and a

measurable financial return from their investment.

Whilst there are many definitions of impact, the key themes

identified by the impact community, which all point towards a

more sustainable economy are:

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2013 2014

21.4 trillionglobal market60 billion

46 billion

IMPACT REPORT 2016


AREAS OF IMPACT HOUSING AND LOCAL FACILITIES

£ INCOME & FINANCIAL INCLUSION

PHYSICAL HEALTH

MENTAL HEALTH & WELLBEING

ENVIRONMENTAL CONSERVATION

CITIZENSHIP & COMMUNITY

ARTS, HERITAGE, SPORT & FAITH

INTERNATIONAL DEVELOPMENT

Although not an exhaustive list, the aim is to give organisations whose activities directly address one or more of these themes, the

opportunity to raise their profile and raise capital for their projects through their membership of the Social Stock Exchange. At the

appropriate time companies can also list on the public market so that investors seeking purposeful opportunities can easily identify

and invest in these companies.

124,000 jobs created/sustained by partners in 2014

37% per kWh reduction in energy cost in Developing countries for 2014

2.27m patients registered

14m days of affordable housing

50% in carer depression

66,000 clean electricity generators

48,000 kWh annual energy savings

2,023 tonnes CO2e avoided

46,000 customers using renewable energy

20 tonnes/day CO2e saved by using H vs diesel in 2015

872 vulnerable people in employment

9.2% CO2 per m3

3 Hydrogen fuel stations built in 2015

25% in average annual household heating spend

25.5% of borrowing clients below international poverty line

1 bn people days of clean water2,500 vulnerable people into training

Tumour spread reduced by 50% in clinical tests

28% per kWh reduction in energy cost in Developed countries for 2014

8,300 patients accessing new facilities in 2015

190 people employed locally (90% women)

78,398 tons CO2e saved by customers in 2015

37 million people financially included (50% from rural, 86% female clients)

791 affordable houses built

CO2 intensity = 1/3 of MSCI index

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IMPACT REPORT 2016


A COMBINATION of a rigorous but transparent and straightforward

application and admissions process along with access to the

world’s first regulated market for impact businesses provides

a compelling combination that can make impact investing a

reality for everyone, not just the wealthy or large institutions. To

complete the jigsaw a network of 65 intermediaries with access

to the retail market has been established. These intermediaries

range from the execution only brokers such as Interactive Investor

and Hargreaves Lansdowne, through to wealth managers such as

Redmayne Bentley and Rathbones

Democratising the access to investments is part of the SSX

mission and strategy as the transition toward a fairer economy

will only be achieved with the support of the whole global

community.

The company’s Social Impact aims are defined in the Company Articles of Incorporation as:

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OBJECTS AND POWERS

1. Objects

1.1 The objects of the Company shall be restricted to:

1.1.1 researching, modelling, piloting, launching, operating, promoting and

developing a capital market(s) and associated infrastructure, capacity and

support for the public listing of Social Enterprises and the trading of securi-

ties in Social Enterprises; and

1.1.2 promoting and developing the social investment marketplace and the

provision of finance and investment to Social Enterprises generally, with

the aim of enabling Social Enterprises to grow, develop and provide social

benefit.

1.2 Pursuant to its objects the Company shall be guided by the social impact

aims and measures set out at Schedule 2 at the end of the Articles.

2. Powers

The Company may do all such lawful things as may further the Company’s objects

and in particular (but without limitation) it may borrow or raise and secure the

payment of money for any purpose including for the purposes of investment or of

raising funds.

WEALTH MANAGERS

65

EXECUTION ONLY BROKERS

NETWORK OF INTERMEDIARIES

The Social Aims and measures are written into the Social Stock Exchange’s objects of its Articles of Association. The social mission

is protected under the Shareholder’s Agreement which states that these objects and social aims cannot be amended without a

shareholder resolution of at least 75% approval.

The Objects are:

Objects and Powers

socialstockexchange.com 15

SOCIAL IMPACT AIMS AND MEASURES

Aims

1. The promotion of social enterprise and socially responsible business by

providing the SSE to enable them to raise profile, attract investment and

raise capital

2. Increase the total amount of capital flowing to the social enterprise sector

3. Improve the amount of social value-add of social enterprises and the

adoption of social impact metrics and outcomes

Measures

4. The total number of social enterprises and socially responsible businesses

and of securities in social enterprises and socially responsible businesses

listed on the SSE

5. The gross amount of capital raised at IPO or further placements and issues

by securities listed on the SSE

6. The total value of securities listed on the SSE on a volume weighted

average basis

IMPACT REPORT 2016


Accsys (listed on AIM & Euronext, www.accsysplc.com ) is a chemical technology group focused on the development and commercialisation of a range of transformational technologies based upon the acetylation of solid wood and wood elements for use as class leading, environmentally sustainable, construction materials.

Aquapak Polymers Ltd is a developer, manufacturer and distributor of a strong fully biodegradable and marine safe polymer film to replace standard plastics in a number of everyday applications.

Ashley House (listed on AIM and the Social Stock Exchange, www.ashleyhouseplc.com ) is a leading health and social care property partner working with providers and commissioners in the public, private & community sectors.

Assura (listed on LSE Main Board, www.assuraplc.com ) develops and owns bespoke primary and community care premises that meet the exacting and demanding needs of the NHS and the patients.

Broadway Partners (not publicly listed, www.broadwaypartners.co.uk) is a provider of communications infrastructure, including broadband internet services to rural communities.

Capital for Colleagues (listed on the Social Stock Exchange, www.capitalforcolleagues.com) is an investment vehicle focused on opportunities in the Employee Owned Business (“EOB”) sector.

Charitable Care Investment Fund, http://fincch.org.uk is an innovative approach to attracting £400m of long term investment for UK pension funds to fund UK care charities to upgrade/ expand their facilities, especially for the elderly.

Chototel (not publicly listed, www.chototel.com ) seeks to address housing poverty, an issue which affects 1.6 billion people globally.

City Windmills Holdings (citywindmills.com) develops powerful wind turbines that run on a vertical axis so they’re suitable for mounting on rooftops and the most compact models are no larger than a residential chimney stack.

Ethical Property Company (not publicly listed, www.ethicalproperty.co.uk) is a unique social business, managing commercial property that supports the work of some of the UK’s most dynamic and influential charities and not-for-profit organisations.

ETHX Energy (not publicly listed, www.ethxenergy.com) is a renewable energy company delivering cost savings and reducing carbon emissions for local authorities, housing associations and communities by supplying low cost energy from biomass.

Golden Lane Housing (Bond listed on the London Stock Exchange, www.glh.org.uk) was established as an independent national charity by Royal Mencap Society in 1998 to help tackle the immense problems that people with a learning disability face when it comes to finding a home.

Good Energy Group (listed on AIM and on the Social Stock Exchange, www.goodenergygroup.com) is a 100% renewable electricity supplier and generator. Good Energy supplies over 55,000 electricity customers and 28,000 gas customers, and supports more than 93,500 homes, business and communities generating their own energy.

1. The Social Stock Exchange membersTHE SOCIAL STOCK EXCHANGE Assists eligible companies to raise their profiles, review their key objectives and align

their shareholder interests with their own and, where appropriate, raise capital from investors who share their values.

Our current members are:

35 SOCIAL STOCK EXCHANGE MEMBERS - MORE THAN DOUBLED IN 201535

WHO BENEFITS?

FIVE BENEFICIARIES 1 SSX MEMBERS 2 SOCIAL COMPANY ADVISERS 3 WIDER SOCIETY & ENVIRONMENT 4 INVESTORS 5 STAFF

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£

IMPACT REPORT 2016


Greenkote (not publicly listed, www.greenkote.com) is a developer of an ecologically sound surface treatment to protect against the corrosion of steel components in civil construction, energy infrastructure and transportation.

Halosource (listed on AIM, www.halosource.com) is a global clean water technology company headquartered in Bothell, Washington, USA. Halosource designs solutions to protect people, preserve the planet and celebrate a most valuable resource: water.

HERi Madagascar (not publicly listed, www.beheri.com) builds and supports solar businesses in rural Madagascar to increase access to products and ser-vices that power community development.

Home from Home Care, (not publicly listed, www.homefromhomecare.com) created by parents to make the difference, provides a range of specialist needs-led services for adults from 17 upwards with learning disabilities and complex support needs.

ITM Power (listed on AIM, www.itmpower.com) manufactures integrated hydrogen energy solutions to enhance the utilisation of renewable energy that would otherwise be wasted.

Menhaden Capital (listed on London Stock Exchange main board and on the Social Stock Exchange, www.menhadencapital.com) is a closed-ended investment trust investing in businesses and opportunities that deliver or benefit from the efficient use of energy and resources

Milestone (listed on AIM, www.milestonegroup.co.uk) has developed a new business model in the media / technology sector and is focused on developing a brand synonymous with innovation and social impact with the Passion Project as its flagship initiative.

Mozambique Renewables (not publicly listed) is a first mover in bringing sustainable biomass from Africa to the international energy market. We only collect crop by-products and weeds to make our energy pellets, so no trees are cut down. Local farmers receive additional payments & we provide employment.

Obtala Resources (listed on AIM, www.obtalaresources.com) has created a multi-industry African centred business focused on creating value for all stakeholders whilst providing positive social impacts in the countries, economies and communities in which it operates.

Oikocredit (not publicly listed, www.oikocredit.org.uk) is an international co-operative and social investor. It dedicates itself to providing wide-ranging financial and technical support through partner organisations for improving the livelihoods of people and communities in developing countries.

People Tree (not publicly listed, www.peopletree.co.uk) is a pioneer in Fair Trade and environmentally sustainable fashion. People Tree partners with Fair Trade artisans and farmers in the developing world to produce ethical and eco fashion collections.

Point 4 (not publicly listed, no website) is a patented vegetation management process using LiDar & Geospatial technology enabling the Utility and Service sectors to design efficient strategies to eliminate power outages; reduce regulatory compliance costs and create environmental and business efficiencies.

Places for People (Bond listed on the London Stock Exchange, www.placesforpeople.co.uk ) is one of the largest property management, development and regeneration companies in the UK.

Propelair (not publicly listed) has developed and patented a water saving toilet system. It uses an innovative air-based operating principle and only 1.5 litres of water per flush, resulting in significant water and carbon savings.

Secured Home Care Ltd (not publically listed) is a provider of a modern blend of personal home care and maintenance of the dwelling, co-ordinated by local managers and using the latest mobile app technology, enabling elderly and frail people to remain in their own homes for longer.

SOLA Outreach (not publicly listed, www.solaoutreach.com) brings small non-profit organisations to the market of social change, with the aim of impacting disadvantaged lives through the reduction of social exclusion.

Solarus, (not publicly listed, www.solarus.com) is a company founded in 2006 that develops, produces and sells hybrid solar PowerCollectors. Solarus works worldwide with local assembly, distribution and installation partners.

Sterling Suffolk (not publicly listed, www.suncrop.co.uk) will cultivate and harvest premium varieties of tomatoes in modern glasshouse utilising heat from waste in the UK reducing food miles.

Straightline Aviation (Hybrid Aircraft – not publicly listed, www.hybridairvehicles.com ) is developing a completely new form of aircraft, akin to an airship, that will revolutionise air transport, dramatically reducing the cost and carbon footprint of moving passengers and cargo.

Synapse Electroceutical (not publicly listed, www.synapseelectroceutical.com) operates in the medical technology sector, developing electroceuticals, which can effectively and quickly heal wounds using tiny electrical pulses rather than traditional medicines.

V22 (listed on the Social Stock Exchange, www.v22collection.com) is a shared ownership art organisation that specialises in the of contemporary art, the production of exhibitions, events and educational initiatives, and the provision of artists’ and artisans’ studios.

ValiRx (listed on AIM, www.valirx.com) is a biopharmaceutical company developing technologies and products in oncology therapeutics and diagnostics.

SOCIAL STOCK EXCHANGE MEMBERS

HAVE ENJOYED INCREASED VISIBILITY

THROUGH THIS UNIQUE CAPITAL MARKETS PLATFORM, MEDIA

COVERAGE AND DEDICATED EVENTS.

£

The Social Stock Exchange members CONTINUED

Member companies see the production of an impact report as a key element of their strategy which

helps them develop their goals and show a public commitment to achieving an impact and how they

will measure it. Some member companies have told us informally that they have used the impact

reporting process as part of a re-alignment of their businesses for instance by divesting of certain

assets or restructuring to align the business to a more social/environmental vision. During 2016 the

intention is to survey member companies to better articulate and formalise this anecdotal feedback.

30 events highlighting the Social Stock Exchange and its members took place in 2015. Being a

member of the Social Stock Exchange also gives these companies access to a growing community

of investors aligned with the company’s vision: at the end of 2015 the Social Stock Exchange had

a database of 2,500 investors (individuals, family offices, financial institutions…) who expressed

interest in Impact Investment opportunities on our website. A key goal for 2016 is to expand this

through an Investor Outreach Programme (IOP).

EACH MEMBER MUST PUBLISH AN IMPACT REPORT ANNUALLY.


IMPACT REPORT 2016


The Social Stock Exchange members CASESTUDIES

IMPACT REPORT 2016


5. StaffThe team is vital. People will ensure that the vision described here becomes a reality so 15% of the company’s share capital has

been allocated to be awarded to staff as share options. The intention is to help align our vision and mission with the whole team and

ensure that all staff share in the success of the company as it grows: Here are 3 brief testimonials:

Jason de Andrade

I joined the Social Stock Exchange in

September 2014 following a career in

Private Banking. I was immediately drawn

to the mission and vision of the Social Stock

Exchange – building the world’s first stock

exchange for pro-social and pro-environmental

businesses.

I was attracted by the opportunity to use

my existing knowledge and skills within the

fledging thesis of Impact Investing, as well

as the challenge of intermediating the two

worlds of traditional capital markets and social

finance. The business is going from strength

to strength and it is a pleasure to be able to

play a key role in developing the market place.

Sara-Louise Porter

I have always loved working with smaller

businesses to help them scale – understanding

their needs, making connections, raising their

profile, introducing investors – it can all make

a huge difference. The fact that I now get to

do this for inspirational companies addressing

social or environmental issues is the icing on

the cake. The Social Stock Exchange has big

plans and I am thrilled to be part of it.

Clement Huret

I am glad to be working for the Social Stock

Exchange as its mission is very meaningful to

me. It is an opportunity to change capitalism,

integrating social and environmental outcomes

on top of financial profit. This is obviously

challenging as projects are very different and

impact measurement needs to be crafted,

but I believe this is what makes this job very

interesting.

2. The Social Company Advisers (SCAs)TO BE SUCCESSFUL and to deliver value to members, it has been

necessary to partner with companies and firms which can

support transactions. There are two types of partners:

Adviser members:

In order to achieve momentum, we have partnered with a

network of professional organisations (law firms, corporate

finance companies, accountants) which assist at various stages

of a company’s evolution. These advisers are called Social

Company Advisers (SCA’s). At the end of 2015 the Social Stock

Exchange had 15 adviser members with a different range of

skills and specialities across sectors. These companies benefit

from our activities as the Social Stock Exchange provides deal

flow of capital raises via financial markets and public listings.

Furthermore, it is our belief that these advisers will be able to

use their experience with the Social Stock Exchange to develop

their operations in the emerging impact sector. In 2016 the

intention is to track the number of broker roadshows completed

on behalf of members.

Impact Report Specialists:

These are the companies – mostly consultancies focused on ESG

measurement - which assist in the compilation of companies’

Impact Reports for new applicants and existing members: to

become a Social Stock Exchange member, applicants need to

produce an impact report with the help of a third party. This

report must be updated annually to maintain Social Stock

Exchange membership and the Independent Admissions

Panel reviews the targets laid down in previous reports and

hold companies to account. Impact Report Specialists benefit

from the Social Stock Exchange activities as it brings new and

recurring clients to these companies. The Social Stock Exchange

regularly engages with these companies to understand their

requirements to produce the best report quality. In return the

Impact Report Specialists play a key role in updating the Impact

Report framework and suggest innovative methods to measure

and evidence the positive impact companies in specific sectors

have. Currently there are 10 Impact Reporting Specialists

working with the Social Stock Exchange.

15 NEW SOCIAL CORPORATE ADVISERS JOINED OUR NEW ADVISORY MEMBERSHIP STREAM IN 2015 15

MORE THAN 300 INVESTORS ATTENDED SOCIAL STOCK EXCHANGE EVENTS IN 2015 300

3. InvestorsTHE SOCIAL STOCK EXCHANGE seeks to become to be a focal

point for high-quality impact investment opportunities. As it is

the first public market worldwide dedicated to impact businesses

it is hoped it will become the first access point for investors

looking for investments with positive social or environmental

outcomes. Providing access to impact investment opportunities

is the core business of the Social Stock Exchange not only for

mainstream institutional investors but also for retail investors:

the Social Stock Exchange has dedicated itself to democratizing

the impact investment world by creating solutions that allow

retail investors to play an active role in the transition toward a

more sustainable economy and to invest in local projects that

have a direct impact in their communities.

In 2015, the Social Stock Exchange created a network of 65

retail intermediaries that can aggregate small trading orders

from retail investors for better execution. The team has direct

experience of distributing 25 offerings to retail investors.

Furthermore, the Social Stock Exchange has made great efforts

to diversify its product offering to match different investors’

profiles. In addition to publicly tradable Equity and Bond

products, it admitted the first close-ended fund (Investment

Trust) - Menhaden - to trading on its public market (ISDX) in

July 2015; the target is 5 new fund members in 2016. It had

25 equity members at the end of 2015 and 3 debt members.

Additionally, the Social Stock Exchange offers opportunities for

investors to invest in private impact companies (private equity

/ bond) thereby giving investors the opportunity to support

companies in the early stages of their development.

Securities can be bought, sold & managed as part of a regular

portfolio and incorporated in ISA allowance and SIPPs.

The Social Stock Exchange also organizes a series of Impact

Investor Club events where companies seeking investment can

meet with likeminded investors: in 2015, 5 impact investor club

events were held. More than 300 investors attended these events.

19 SPEAKERS FROM THE WORLDS OF BUSINESS AND SUSTAINABILITY GATHERED TOGETHER AT OUR OVER-SUBSCRIBED ANNUAL INVESTOR CONFERENCE

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4. Wider Society and EnvironmentPROMOTING the social and environment benefits of its members

is a key focus for the Social Stock Exchange and although

these benefits cannot be directly attributed to the Social Stock

Exchange, but to its members, there is a wider benefit to society

if companies, which have a broader focus than purely short term

financial performance. In 2016 the Social Stock Exchange aims

to establish local social stock exchanges in cities and regions

seeking to create local impact; irrespective of where investment

flows from, impact is most evident locally. Through the creation

of local social stock exchanges, the Social Stock Exchange

seeks to connect local impact organisations and companies with

local investment via local intermediaries (SCAs). There will be a

physical presence and office in key cities.

IMPACT REPORT 2016


MOREOVER, the Social Stock Exchange will play a full role in efforts to harmonise tools, processes and methodologies in the impact

sector with a view to building a new, global standard for measuring impact. The application for membership is a two stage process

outlined below:

In order to achieve these changes, the Social Stock Exchange has set up a clear strategy and processes that will support these

objectives:

LINKING ACTIVITIES TO SOCIAL OUTCOMES

THE PROCESS

THE SOCIAL STOCK EXCHANGE HAS A MISSION TO DISRUPT EXISTING CAPITAL MARKETS’ OPERATIONS, CREATING A NEW OUTCOME AND A NEW EQUILIBRIUM IN A COST-EFFECTIVE WAY - ONE WHERE ISSUERS VALUE IMPACT AS MUCH AS THEY VALUE FINANCIAL RETURN.

24

APPLICATION

ADMISSIONS PANEL

IMPACT REPORT

ADMISSIONS PANEL

MEMBERSHIP

IMPACT REPORT 2016


OUTCOME 1: IMPACT ASSESSMENT, ALIGNING BUSINESSES & INVESTORS VALUES

To join the Social Stock Exchange, companies undergo a transparent and rigorous selection process that is independently validated, a

key output of this process is the Impact Report.

The impact report template is clearly defined and can be found on the Social Stock Exchange website (http://socialstockexchange.

com/assets/new/docs/SSX_Impact_Report_template_V3.pdf). Finally, the Social Stock Exchange is regularly consulting with various

social & environmental impact assessment experts to improve the quality of the data and framework of this report.

REAL LIFE STORYThere are numerous methodologies available and in some cases, competing for attention in the impact space; the OECD has set a project in motion to look at harmonising reporting, GIIN has put together a Holding Company working group of which part is looking at reporting, IRIS, IIRC and SASB are further examples of work in this area. The Social Stock Exchange aims to collaborate and not confuse or create more work for companies seeking to measure impact but this will remain a challenge until some form of global standard is agreed upon. As the membership grows the ability to scale impact measurement will also be key and so therefore will be the balance of quantitative and qualitative measurement; current thinking is a purely quantitative measurement will mean many of the nuances would be lost so a balanced approach of quantitative and qualitative is the favoured way forward.

Finally, local language impact reporting will present further challenges as the Social Stock Exchange expands into Europe. To that end relationships have been developed with organisations such as Phineo and Endeva to explore how this might work.

OUTCOME 2: GENERATING DEMAND IN THE IMPACT SECTOR

A major challenge is the lack of visibility and credibility of impact businesses on financial markets. Although many impact

certifications exist, surveys in financial institutions show that one of the biggest hurdles to the development of impact businesses

is the inability to categorize investment opportunities as impact opportunities. Another challenge is the misconception that impact

businesses cannot be profitable and are therefore not viable investment opportunities.

The Social Stock Exchange seeks to address this challenge by verifying a company’s impact credentials via the admission process.

There is approximately a 50% pass ratification rate from initial application to membership. In 2015, 54 applications for Social Stock

Exchange membership were received from businesses at various stages of growth; only 18 progressed to membership.

54 SSX APPLICATION FORMS RECEIVED IN 2015 (2014: 9 APPLICATIONS)

£400 MILLION RAISED BY SOCIAL STOCK EXCHANGE MEMBERS IN 2015 TO DEVELOP THEIR ACTIVITIES

The fact that a total of £400million was raised by Social Stock Exchange members demonstrates that there is a demand for impact

investments opportunities if impact can be evidenced robustly.

REAL LIFE STORIESGiven the nascent nature of this market the decision was taken to stimulate demand by creating the Social Stock Exchange’s own pipeline of business, rather than the more traditional approach of relying on advisers for deal flow. There is an approximately 50% failure rate for businesses from application to successful membership, meaning that in order to grow membership to 60 members, a minimum of 10 applications a month are required to produce 5 members a month. This requires a robust pipeline of prospective members and this is a focus in the second half of the year. The Panel has found that whilst many smaller businesses have great impact credentials, they can be less commercially robust. On the other hand larger, more commercially robust businesses often find it harder to evaluate true, meaningful, additional impact at their core; this paradox looks set to continue in the immediate future.

The focus now is to build the corresponding network of investors via an investor outreach programme. The Family Office event, attended by more than 110 people, provided a step change in the engagement with this key audience and investment opportunities are now being shared with this network alongside other previously identified investors.

IMPACT REPORT 2016


The Social Stock Exchange seeks to help impact businesses to scale their activities by raising their profiles, improving their visibility

and connecting companies to financial advisers, consultancies and investors. In 2015 the Social Stock Exchange directly raised more

than £20m for one member, enabling them to scale their activities, and invest in projects that will generate genuine positive impact

REAL LIFE STORIESThe Social Stock Exchange aims to provide members with connections, access and visibility. This is achieved in various ways not least through a varied and vibrant events programme – there are monthly Impact Investor Club events providing member companies with access to impact investors, member networking events as well as an annual investor conference..

Access to capital is increasingly a major attraction for members and prospective members. Initially it was only possible to introduce members to advisers to connect with sources of capital, however since being approved as an Appointed Representative (AR) of Kession Capital (to “introduce and arrange”) it is possible to introduce member companies seeking capital to investors directly. There is still a “scale challenge” with institutional investors who will not invest under £50m and ideally £100M. Whereas most businesses are seeking to raise £1-50m with the majority looking for £5-15m.

The approach has therefore been to approach family offices, nigh net worth and ultra-high net worth individuals in the first instances; many of these have a10-20% allocation to impact alongside philanthropic donations. The inaugural Family Office Conference took place in May 2016 and attracted a rich audience of high value impact investors to whom investable opportunities from members have since been marketed.

The Social Stock Exchange was launched in 2013 as a company providing information and a framework (the impact report) to assess

the impact of a company. However the mission is to promote the impact sector by giving all investors the opportunity to invest

in impact businesses. As a result, the Social Stock Exchange established a partnership with ISDX (Icap Securities & Derivatives

Exchange) in January 2015 and launched the first public market dedicated to impact opportunities. Specifically, ISDX opened a

Social Stock Exchange - dedicated segment enabling Social Stock Exchange members to IPO or list their shares on this market. As

a result the shares can be traded as on any other public market. This moved the business model from a measurement business to a

transactional financial services business. It also provides early investors with an exit strategy, reducing the liquidity risk related to

the sale of a private company. In 2016, there will be a focus on launching a campaign to persuade listed companies to dual list as

well as supporting impact businesses wishing to list on a public market for the first time.

REAL LIFE STORIESWhilst the initial approach has been to target professional or qualified investors, the ultimate aim is to provide access to public markets for impact companies. There have been two strands to this approach: a dual listing campaign and a retail IPO with distribution via the intermediary network. The dual listing campaign is aimed at informing businesses, already listed on other exchanges, of the benefits of joining the growing cohort of impact businesses and dual list on the Social Stock Exchange market thereby helping them stand out from the crowd and differentiate themselves from other businesses on a more vanilla exchange.

The launch of an IPO to retail investors is more complicated as the costs are higher (as a percentage of the amount raised at smaller amounts) because of the need for a prospectus and the associated professional costs. This means that it is only appropriate for businesses seeking £10m plus and those seeking to widen their shareholder base. The exciting aspect of providing access to the public markets is that “real” people can use existing market infrastructure and tax arrangements to invest in impact businesses via their SIPP & ISA. Once this happens impact investing will no longer be the preserve of professional and rich investors which can only be a good thing if impact investing is to become a part of mainstream investing.

OUTCOME 3: SCALING IMPACT OUTCOME 4: ACCESS TO PUBLIC MARKETS

IMPACT REPORT 2016


OUTCOME 6: FACILITATING LOCAL IMPACT

As per Section 3, in 2015, the Social Stock Exchange created a network of 65 retail intermediaries that can aggregate small trading

orders from retail investors. That means that Social Stock Exchange members’ securities can be bought and sold in small volumes

to retail investors. This enables retail investors to invest in projects that directly relate to their local community or in specific impact

themes such as biodiversity or clean energy. A key goal for 2016 is to launch a retail intermediary offer to raise capital for member

companies using this network.

REAL LIFE STORIESAs with Outcome 4, the challenges of making impact investment opportunities available to the general public have been numerous and not always within the control of the Social Stock Exchange. As well as the £10m plus challenge, there have been various exogenous shocks that have prevented the launch of a number of retail offers via the intermediary network.

These have included the changes to the Feed In Tariff regime announced by the government towards the end of 2015, the Scottish Referendum, the General Election and the European Referendum; all of which led to uncertainty and delays for member companies.

OUTCOME 5: DEMOCRATISING FINANCE

The aim to is create a series of local exchangers to connect local companies with local advisors and investors.

REAL LIFE STORIESMost impact occurs locally and the intention is therefore to establish local Social Stock Exchanges which seek to link local business, with local investors and advisers. A pilot scheme was launched in Exeter towards the end of 2015 and another was launched in Liverpool in June 2016. The launch in Liverpool was preceded by a pathfinder project to establish the appetite for such an exchange – a detailed research report was published containing opinions and data as a result of interviews with nearly 400 businesses and investors.

IMPACT REPORT 2016


THROUGH ITS BUSINESS, the Social Stock Exchange has formal processes and informal interactions to engage with different groups

to ensure the best delivery of its mission. Below is a list of identified stakeholders and how these individuals and organisations

respond to the Social Stock Exchange activities.

THE SOCIAL STOCK EXCHANGE DEFINES ITS STAKEHOLDERS AS INDIVIDUALS, GROUP OF INDIVIDUALS AND ORGANISATIONS THAT ARE AFFECTED DIRECTLY OR INDIRECTLY BY ITS ACTIVITIES.

32

STAKEHOLDERS

EXISTING MEMBERS

SOCIAL STOCK

EXCHANGE MEMBERS

PROSPECTIVE MEMBERS

Membership of the Social Stock Exchange enables companies to join a leadership group of businesses dedicated to social and environmental change through their core activities.

Many companies with very different profiles are looking to demonstrate their impact and finance their projects

1. Every year, we engage with our members on their Impact assessment: we discuss the new assessments, outcomes, targets and the overall content of the Impact Report

2. Members are invited to several events hosted by the SSX to meet investors and the financial community

3. We work with our members on their funding strategies, with corporate advisers that we introduce

4. We provide access to the first Recognised Investment Exchange (RIE) dedicated to impact investments for members willing to list on a public market

1. We build and maintain a pipeline of prospective members based on internal research.

2. We work with prospective members on the definition of their strategies, introducing impact assessment

1.

IMPACT REPORT 2016


The Social Stock Exchange is a “for-profit” company.

1.FAMILY

OFFICES/HIGH NET WORTH INDIVIDUALS

(HNWI)

INVESTORS

The Social Stock Exchange mission is to generate impact investment opportunities for established investors as well as for people willing to get involved in Impact Investment opportunities rather than traditional solutions offered by mainstream finance institutions

1. HNWIs and family offices

have showed a growing

interest for impact investment

opportunities: we engage them

through events and a growing

network of financial adviser to

raise awareness on the impact

investment landscape

2. The Social Stock Exchange

brings to Institutional Investors

opportunities [details...]

3. We created an innovative

distribution system that

aggregates small orders from

several retail-focused brokers,

enabling retail investors to

invest directly in our publicly-

listed securities

4. Through this retail distribution

system and crowdfunding,

we empower the people by

creating the opportunity to be

part of the transition toward a

more sustainable world, using

existing financial tools

5. Fund Managers have engaged

the Social Stock Exchange to

include some of its securities,

or to create impact-focused

funds

2.INSTITUTIONAL

INVESTORS

3.RETAIL

INVESTORS

INDIVIDUALS & ORGANISATIONS

SOCIAL STOCK EXCHANGE

SHAREHOLDERS

There are monthly

board meetings to align the Social Stock Exchange strategy with its financial targets and

social impact aims

BROKERS, LAWYERS,

CORPORATE FINANCE

HOUSES, REGISTRARS,

AUDITORS & OTHER

FINANCIAL SERVICESSSX SOCIAL

COMPANY ADVISERS

(SCAs)

IMPACT ASSESSMENT

SPECIALISTS

The SSX and its members work with the SCAs at various level from the project definition to post-IPO investors relations

To achieve the SSX membership, companies have to produce an Impact Report with the help of a 3rd party

1. The SSX does roadshows to introduce its members and their projects to the financial community creating business opportunities

1. The SSX brings new clients to Impact Assessment specialists through the redaction of the Impact Report

2. The SSX has regular consultations with these specialists to improve the Impact Report framework and the way to evidence positive achievement from different companies

2. 3.

4.

IMPACT REPORT 2016


EVIDENCING SOCIAL VALUESTAKEHOLDERS OUTCOMES INDICATORS 2015 2016 COMMENT ON INDICATOR

SOCIAL STOCK EXCHANGE ISSUER MEMBERS

Increased profile, visibility & media coverage

Number of events organized by the Social Stock Exchange

10 18 Events directly organized by the Social Stock Exchange

Other industry events representation 25 20 Events where Social Stock Exchange staffs are guest speakers

Access to Impact Investors Number of Retail Investors registered attended events at the Social Stock Exchange

56 5000 Investors that expressed interest via the website or events

Number of Family Offices registered or attended events at the Social Stock Exchange

0 30 N/A

Number of Institutional Investors registered or attended events at the Social Stock Exchange

60 80 - 100 N/A

AUM of Institutional Investors registered or attended events at the Social Stock Exchange events

£2 trillion TBC As per June 2016

Increased visibility on capital markets

Capital raised by Social Stock Exchange members (M.GBP)

500 N/A Information not available

Sponsorship of Awards 3 3 N/A

Access to capital Capital raised by the Social Stock Exchange (M.GBP)

20 TBC 2016 data will be disclosed at the end of the year

Number of Listed Companies on the Social Stock Exchange

4 6 N/A

Number of IPOs on the Social Stock Exchange 0 1 N/A

Access to specialized corporate finance houses & brokers

Number of Social Stock Exchange Social Company Advisers (SCA)

15 20 Network of specialized advisers, lawyers, corporate finance houses & brokers

Number of contracts signed by Social Stock Exchange members with SCAs and other advisers

1 2 As per June 2016

Access to business opportunities with other Social Stock Exchange members

Number of contracts signed by Social Stock Exchange members with other members


SOCIAL STOCK EXCHANGE POTENTIAL ISSUER MEMBERS

Same outcomes as Social Stock Exchange members

Number of Social Stock Exchange Application Forms received (split AF / IR)


SOCIAL COMPANY ADVISERS - FINANCIAL SERVICES

Access to dealflow (1) Number of Social Stock Exchange Members looking to raise capital


Access to dealflow (2) Number of deals referred to SCAs Not monitored

10 As per June 2016

IMPACT REPORT EXPERTS

Impact assessment projects Number of Impact Report produced 32 50 2016 target number

INVESTORSDemocratizing Access to Impact Investment opportunities

Launch Retail Offers via Intermediaries 0 1 Share issuance accessible to retail investors

WIDER SOCIETY

The Positive Impact Social Stock Exchange members have on the wider society

See Annex for Indicatorskoopp[l N/A (see Annex)

N/A (see Annex)

Circa 200 KPIs reflecting the positive social / environmental impact of Social Stock Exchange members on society

36

We are aware there are limitations to the metrics above, however we wanted to be transparent about where we are at the moment. We are building something new and it isn’t easy! We intend to refine and improve these metrics and the Impact Report itself in the coming year

IMPACT REPORT 2016


IT’S 3:30 IN THE MORNING

There are a number of issues that the Admissions Panel has had

to confront in the past 18 months or so. As John Elkington has

stated – “It is 3:30 in the morning….”, in other words this is a new

concept which is still under development.

PUBLIC V PRIVATE

At launch the vision was one of establishing an exchange which

looked to publicly quoted companies for membership. The reality

is that a large number of impact companies are private and

therefore membership has expanded to include approximately

50% private companies. By nature, private companies tend to

be earlier stage and in need of funding and are often higher risk

ventures.

LARGE V SMALL

The Panel has also discussed the balance between larger and

smaller companies and the inherent risk that some smaller,

earlier stage companies may fail or at least not be as successful

as hoped. Smaller, start-up companies also have the added

disadvantage that they cannot demonstrate an impact track

record. The Panel’s general view is that size should not be a

barrier to membership where a business has made the necessary

declarations for positive socio and/or economic impact and has

set out clear metrics it intends to measure in the upcoming year

REPUTATIONAL ISSUES

Although according to the Terms of Reference for the Panel,

it should focus on the impact a business has, it has proved a

considerable challenge not to take commercial and reputational

issues into account. The consequences of businesses failing

could affect the long term viability of the Social Stock Exchange

and cause collateral brand damage. Equally if a company

is achieving a high degree of impact but is discovered to

have other legal or governance issues, then again this could

undermine the credibility of the Social Stock Exchange as well

as individual members of the Admissions Panel (all of whom

are volunteers and have “day jobs” in or around the impact

investment sector). As a result of these issues, it has been

necessary for a greater degree of due diligence to be carried

out by the Social Stock Exchange management team to mitigate

these risks.

IS LESS BAD GOOD?

Another issue that the Panel has debated over the course of the

past 18 months as the membership has grown is that of relative

impact – if a company operates in a “difficult” sector for instance

in the oil and gas sector but does so in a more sustainable and

pro-social, pro-environmental way should this be applauded or

discouraged? This has sometimes been summarised as “is less

bad, good”?

SCALING ADMISSIONS PROCESS

Finally, perhaps the biggest challenge, from a non-commercial

point of view, as the Social Stock Exchange seeks to grow to 60

members is how the admissions process and impact reporting

process can be scaled at the same time and not reducing it to

a purely numerical or pass/fail process. Some work has been

carried out to ease the workload of the Panel members, through

the production of an impact reporting scorecard which allows

the Panel to focus on key areas of weakness or concern during

the review process. This will become even more relevant as

the membership grows because the impact reporting process

is annual, meaning that the Admissions Panel reviews existing

members as well as new members’ impact reports

OTHER ISSUES

38

It ought to be remembered that there is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things. Because the innovator has for enemies all those who have done well under the old conditions, and lukewarm defenders in those who may do well under the new. This coolness arises partly from fear of the opponents, who have the laws on their side, and partly from the incredulity of men, who do not readily believe in new things until they have had a long experience of them. Niccolò Machiavelli, The Prince

IMPACT REPORT 2016

socialstockexchange.com40

If you have any questions, comments or suggestions, please contact: Tomas Carruthers (CEO) | [email protected] or John Elkington (Chair of the Admissions Panel) | [email protected]

Documents

SSX_Impact Report_2016