Social stock exchanges set for boost as Centre tweaks CSR investment norms

In a major boost to India's social stock exchange (SSE) ecosystem, the Ministry of Corporate Affairs (MCA) has allowed companies to channel a portion of their corporate social responsibility (CSR) spending towards not-for-profit organisations (NPOs) listed on SSEs.

In a notification issued on Friday, the MCA recognised investments through 'zero coupon, zero principal' (ZCZP) instruments listed on SSEs as an eligible CSR activity. The amendment enables companies to deploy CSR funds to eligible NPOs through the SSE framework.

The move is expected to strengthen funding avenues for social enterprises by encouraging corporate participation through a regulated, disclosure-driven platform focused on transparency, accountability and impact measurement.

"This is a significant step for India's social sector, enabling corporates to deploy CSR funding through a transparent, regulated and impact-driven platform. It will strengthen trust, accountability and access to capital for social enterprises," said Sriram Krishnan, chief business development officer at the National Stock Exchange (NSE).

Market participants said the amendment addresses a long-standing gap in the SSE framework. While the platform was created to facilitate fundraising for social enterprises, CSR allocations remained outside its ambit, limiting the pool of potential funding available to NPOs. Stakeholders had been seeking regulatory clarity on allowing CSR funds to be routed through SSE instruments.

The SSE framework was first proposed by Finance Minister Nirmala Sitharaman in the Union Budget for financial year 2019-20 as an electronic fundraising platform for social enterprises under the regulatory oversight of markets regulator Securities and Exchange Board of India (Sebi). The first listing on an SSE took place in December 2023.

Currently, 90 social enterprises are registered on the NSE's social stock exchange platform. To qualify, organisations must meet eligibility criteria prescribed by Sebi and comply with detailed standards relating to social impact disclosures and financial reporting.

According to MCA data, total CSR spending by companies rose to ₹34,909 crore in FY24 from ₹30,932 crore in FY23.

In a separate measure aimed at broadening participation in the segment, Sebi last year reduced the minimum investment size in ZCZP instruments issued by NPOs on SSEs to ₹1,000 from ₹10,000. These instruments allow social enterprises to raise funds for specific causes without offering any financial return to investors.