Time for the Not for Profit Stock Exchange?

With increasing investment in the Australian Not for Profit sector to achieve better outcomes for the community, one way of both increasing and leveraging investment may be a ‘stock market for good’, says David Crosbie, the CEO of the Community Council for Australia.

While Australians have been revelling in the mining boom or lamenting the decline of retailing and manufacturing, there is one large part of our economy that has been quietly and consistently exceeding expectations. The Australian Not for Profit sector has more than doubled its contribution to GDP in less than a decade, a performance that outstrips any industry other than mining.

The sector now employs over one million Australians (second only to retailing), has over five million volunteers, and turns over around $100 billion annually. 

With the establishment of the Australian Charities and Not-for-profit Commission (ACNC) as a new regulator, there is no clamour from the Not for Profit sector to return to the good old days when the ATO was empowered by over 400 years of legal argument to both giveth and taketh away charitable status.

Now that there is a dedicated regulator in place, perhaps it is time to move on to another challenge – increasing investment in the Not for Profit sector to achieve better outcomes for the community.

One way of both increasing and leveraging investment may be a ‘stock market for good’: a place where individual and group investors can buy into social change, where returns are counted in terms of social impact; a place where investors feel rewarded through the benefits their investment provides to a community, not just their economic returns.

You may, for example, want to improve the life chances of Aboriginal children by investing in programs to help young Aboriginal kids stay at school. You could visit the ASX social investment market and purchase shares in the best performing organisation working in that area. You might choose the organisation that delivers the best retention rates for the most marginalised groups over the shortest time period and with the lowest costs. If you were making a longer term investment, you may be able to claim some small financial returns or additional tax concessions.

When investing through the traditional stock exchange, most people consider factors such as the track record of those involved in the company; whether they have a history of achievement; the existing organisational capacity and performance including comparisons with likely competitors; and how well those involved in the organisation have successfully capitalised on market opportunities.

Similarly, investors in Not for Profit organisations might want to know that there is a competent, management team; good governance; a sound financial base; and a capacity to deliver sustained performance over time. Adopting a social investment approach would therefore require organisations to more effectively market not just what they achieve, but who they are.

One of the real benefits of a ‘stock-market for good’ might be the ability to drive expansion of better performing organisations. In a well-developed social investment market, Not for profit organisations that can demonstrate how effectively they achieve their purpose will be able to gain increased support and capacity from discerning investors. The market may also lead to increased mergers between organisations that are not fulfilling their potential, and encourage greater accountability for the achievement of real outcomes.

This form of leveraged social investment can never be, and never should be, a replacement for philanthropy or for governments and other funders supporting good organisations of all sizes doing wonderful work in their communities. But what if it could become a competitor to the ASX itself – an alternative investment providing social rather than financial returns?

Over the coming decade, the growing interest in realising a return on social investment will raise some very important and challenging questions for not-for-profit organisations about exactly who they are and what they really achieve. The better the Not for Profit sector can answer these questions, the more effective and sustainable the sector will be.

As we all know, a strong Not for Profit sector is at the heart of flourishing communities across Australia, so why not strengthen our communities through structured social investment?

Find out more about NFP Stock Exchanges overseas:

The US Social Impact Exchange 
South Africa’s Social Investment Exchange 
Impact Investment Exchange Asia

About the author: David Crosbie is currently Chief Executive Officer of the Community Council for Australia (CCA), a member of both the Not-for-profit Sector Reform Council and the Advisory Board to the Australian Charities and Not-for-profit Commission.