A Stock Exchange for Do-Gooders
Monday, June 2, 2008
By Mac Margolis
Celso Grecco used to think his priorities made perfect sense. “My plan was to work hard, get rich and retire,” says the 46-year-old S?o Paulo marketing ace. “Then maybe I’d take up some worthy social project.” For a brass-tacks businessman like Grecco, the rules of engagement were clear. Money came first. Saving the world could wait. He made his name by the time he was in his 30s, coaching corporate stars like the tiremaker Pirelli and the Brazilian cosmetics and bath-products giant Natura on how to hawk their brands-but then he abruptly realized he had more important work to do. Brazil’s stop-and-go economy had left millions of people behind, inspiring a profusion of civic groups and social causes. “Suddenly everyone was talking about corporate responsibility,” Grecco recalls. “That’s when the penny dropped. To be successful, companies also need to be good citizens.” So he sold his consultancy and set out to become a pioneer in the field he calls “social marketing.”
As Grecco saw it, the toughest challenge for would-be donors was to choose among a bewildering multitude of outstretched hands. He offered his answer to the directors of Bovespa, the S?o Paulo Stock Exchange: why not create a kind of good-works trading space, where carefully screened civic groups in need of cash could connect with concerned investors? In other words, allow the marketplace to make informed decisions about which projects to fund. The idea appealed to Bovespa’s president, Raymundo Magliano Filho, who had been searching for ways to expand his bourse’s longstanding commitment to charitable causes. With his backing, the world’s first “social stock exchange” opened for business in 2003. Since then, private donors making online pledges (there is no trading floor) have contributed more than $5.5 million to 71 philanthropic enterprises, from helping island dwellers to prepare for the ravages of climate change, to rescuing slum children from drug gangs. It’s a puny sum compared with the trillions of dollars sloshing around the global capital markets, or indeed the budgets of the biggest charitable foundations, but the experiment’s effects are continuing to spread around the world.
England and Germany are planning to launch their own social stock exchanges next year. South Africa’s opened in 2006. Others are on the drawing board in India, New Zealand, Portugal and Thailand. Brazil’s prototype, now called the Social and Environmental Stock Exchange (BVS&A), has revolutionized the field of corporate giving. “We are finally getting rid of the stupid ideologies and embracing pragmatic solutions,” says Georg Kell, head of Global Compact, a U.N. group devoted to fighting poverty. “Business solutions are the only reliable pathways out of poverty.”
For Grecco it’s a big change from all the cold stares he got when he first took the idea abroad in 2004. Some financiers praised the idea but insisted it would never fly with shareholders. “Let’s leave [social policy] to our governments,” one European executive told him. “We pay taxes, and this is their business.” Grecco was disappointed but hardly surprised. A charitable stock exchange differs radically from other financial arenas. Investors don’t become partial owners of the civic groups they fund or have a say in how projects are run, and the only profit is the “social dividend” of knowing you have contributed to the greater good.
Nevertheless, the donors’ bourse offers other things that intelligent investors crave: order and transparency. Those attributes are far too rare in a field that for want of objective standards has often been dominated by partisan passion and blind faith. Before a project gets listed on the BVS&A, it’s thoroughly vetted. Grecco and a team of evaluators screen each project, poring over the sponsor’s accounts and business plans in extensive interviews and site visits. Only one project in 10 makes the grade. “You know you aren’t throwing money into the dark,” says Jorge Salgado, a Rio de Janeiro broker who reserves a portion of his house’s earnings every year to invest in the BVS&A. “A listing on the exchange is a seal of quality.” In the United States, online groups like kiva.org, which directs microloans to carefully preselected projects, and donorschoose.org, which allows users to fund very specific educational needs (including projects for individual teachers), offer a chance for similarly targeted giving.