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As the United Nations Global Compact and other development organizations have recognized, big companies can play a pivotal role in raising living standards around the world. Given that their largest shareholders often expect these companies to generate the highest possible rates of return, what’s the best way for them to benefit society as well? Our new working paper offers an answer that may seem counterintuitive at first: Publicly owned companies will be most effective in creating social benefit when they 1) plan for a long time horizon and 2) focus on a single bottom line. The long time horizon is the key here, since several years may pass before the effects of social initiatives feed back into profits. But we’ve found that they do feed back in so many important ways that profit-maximizing companies have an obligation to take investments in social initiatives seriously.

One might also argue that double- and triple-bottom lines help to promote transparency and accountability for social benefits, especially in emerging economies. Yet investments that satisfy double- and triple-bottom lines in the short term may not be built for long-term sustainability. Moreover, evaluating and reporting social investments with the same criteria as other investments offers a kind of transparency that we think shareholders will value in any economy.  For most large public companies, we believe that targeting the long-term single bottom line offers clear benefits for executives, shareholders, and, most importantly, for society as a whole.

Local stock exchanges once were common but faded as face-to-face trading shifted to electronic platforms and the biggest U.S. stock-exchange operators acquired smaller rivals. Among the few remaining exchanges, the former Philadelphia Stock Exchange is now an options exchange owned by Nasdaq OMX Group Inc. A minicomeback might be around the corner. In April, Hawaii lawmakers agreed to begin examining the state's securities laws to possibly create a "locally focused, Hawaii-based stock exchange."

In Toronto, organizers of the Social Venture Exchange, or SVX, are expected to launch this summer a specialized exchange to link institutional investors with local companies having a social or environmental impact. The fledgling market is backed by Toronto Stock Exchange owner TMX Group Inc. Local exchanges are also in the works in Europe, Africa and Asia.

But other efforts at "loca-vesting," as the concept is known, have struggled. Investbx opened in 2007 in the U.K. city of Birmingham to serve small companies in the West Midlands region. Last month, the exchange was sold for a token £1 ($1.6352) after bringing just three companies to market and absorbing more than £3 million ($4.9 million) in public subsidies.

Public Administration Committee hears from Independent advisor to the Cabinet Office on the Big Society Bank, Social Enterprise Coalition, Association of British Credit Unions and Community Development Finance Association

The Big Society Bank should become the “financial pump” of the social sector, MPs heard today