Social Stock Exchange will give new direction to CSR

By Srijan Kishore

For more than a decade, Corporate Social Responsibility (CSR) in India has largely followed a familiar path. Companies identified social causes, partnered with NGOs and supported projects that addressed local needs.

A recent amendment by the Ministry of Corporate Affairs (MCA) has introduced a new dimension to this model. Companies can now use up to 10% of their annual CSR budget by subscribing to Zero Coupon Zero Principal instruments issued by eligible NGOs listed on the Social Stock Exchange. To enable this, the Government has amended both Schedule VII of the Companies Act and the Companies Corporate Social Responsibility Policy Rules, 2014.

At one level, this is a technical amendment. At another, it indicates a deeper shift in India’s approach to corporate philanthropy. The Social Stock Exchange was created to connect credible social organisations with funding through a regulated platform overseen by the Securities and Exchange Board of India. Unlike a conventional stock exchange, there is no expectation of financial returns. The Zero Coupon Zero Principal instrument does not pay interest and does not return the principal amount. It is in essence, a structured philanthropic contribution that combines the discipline of financial markets with the purpose of social development.

The Government believes this will make CSR funding more transparent and easier to deploy. It can also encourage more organisations to adopt stronger governance practices since listing on the Social Stock Exchange requires regular disclosures and compliance with regulatory standards. Companies, in turn, receive another avenue for fulfilling a part of their CSR obligation within a recognised regulatory framework.

These are welcome objectives. Good governance has become an essential part of the development sector. Organisations that work for public welfare handle resources meant to improve people’s lives. They must therefore be accountable not only to donors but also to society. A transparent funding platform can strengthen public confidence and encourage better reporting, stronger financial systems and greater institutional credibility.

Yet every reform deserves careful examination. CSR has always been more than a financial transaction. It is also a relationship. Companies often choose implementation partners because they understand local realities, enjoy the confidence of communities and have years of experience in addressing complex social challenges. Those strengths cannot always be measured through disclosure requirements or regulatory filings alone.

The new framework could gradually change this relationship. Larger organisations with established governance systems are likely to find it easier to access the Social Stock Exchange. Smaller organisations working in remote districts may not possess the same administrative capacity, even when their work has transformed communities over many years. There is a possibility that access to funding may increasingly depend on institutional readiness rather than grassroots credibility.

This does not mean the reform is flawed. It simply reminds us that transparency and inclusion must advance together. Another aspect deserves attention. The amendment allows companies to route only up to 10% of their annual CSR expenditure through these instruments. This is a prudent approach. It encourages innovation without disrupting the existing CSR ecosystem. Companies remain free to continue working directly with implementation partners while also exploring this new funding route.

In many ways, the amendment reflects the natural evolution of CSR in India. The first phase focused on ensuring that companies spent the prescribed amount. The second emphasised governance, monitoring and measurable outcomes. This reform points towards a third phase where corporate philanthropy begins to interact more closely with regulated social finance.

The success of this transition will not depend on whether the platform strengthens public trust without weakening the diversity that has long defined India’s development sector

(Kishore is a CSR Practitioner and an IICA qualified Independent Director. He holds a PhD in CSR from Santiniketan and a PGDM from XISS. Views are personal)