A time of turbulent markets and talk of more modest returns on assets might not sound promising for advocates of what is called "impact investing", but such a conclusion is premature, a figure in the industry argues, pointing to an increasing weight of data.

It's the impact, stupid.

Well, that might increasingly be the slogan for a trend in financial affairs that has already gained an audience under the tag of "impact investing". A recent conference has highlighted that this trend will gain ground as it overcomes the doubters despite, or perhaps because of, hunger for yield, a prominent figure in this area says.

Nick O’Donohoe, senior advisor to the Bill and Melinda Gates Foundation and founding chief executive of Big Society Capital, believes sceptics of this field are increasingly on the back foot. He recently spoke at a conference in Lisbon, Portugal, attended by more than 250 people from almost 30 countries. There is now quite a network of groups promoting such ideas, such as the Global Impact Investing Network.

"There is a trend towards investors caring about what impact they have over a long period of time. It is driven by a younger generation of investors," he said.

Global capitalism has taken a knock and this has encouraged people to rethink some of their priorities, he said. Another trigger for impact investing is the upheaval going on in many parts of the world, such as the Middle East refugee crisis and environmental concerns.

"There is more awareness around the costs and the benefits of globalisation," he said.

Although impact investing is not yet a major slice of the total assets managed, there are $60 billion of impact investing assets under management, and $12.2 billion of fresh investments was expected to be put in place last year, according to GIIN. One forecast has impact investing AuM topping $3 trillion over the next decade. GIIN defines the area as: "Investments made into companies, organisations, and funds with the aim to generate social and environmental impact alongside a financial return. Impact investments can be made in both emerging and developed markets, and target a range of returns from below market to market rate, depending upon the circumstances."

The figures look impressive, but can the trend continue if people are worried about making ends meet as much as doing good? O'Donohoe was asked whether, at a time of negative real interest rates in some countries, low returns, volatility and concerns about inadequate pension pots, it is realistic to expect more movement into a form of investing that does not always put profit and performance top of the list.

"I think actually there is a willingness these days to take more risk and people are also willing to be more innovative and look at new things. There has been this perception that impact investment requires a trade-off for returns but that does not always have to be the case,” he said.

GINN and Cambridge Associates recently crunched some numbers for impact investing and more traditional portfolios, and found that investors taking the impact route were only receiving marginally lower returns, and so close as to be non-significant except over very long periods. Funds in the Cambridge Associates Impact Investing Benchmark, covering areas such as private equity, posted a net internal rate of return - a measure taking account of the complex timings of deals - of 6.9 per cent as of 30 June 2014. This compared to 8.1 per cent for a comparative universe of non-impact investment funds (source: Forbes). Smaller impact investing funds did better than smaller conventional funds, the data showed.

Other evidence seems to add fuel to the impact investing fire. According to a survey of US asset managers by Cerulli Associates, the analytics firm, a rising percentage of asset managers look at environmental, social and governance factors alongside more traditional financial tests to identify opportunities and risks. And a recent report by Boston Consulting Group and MITSloan Management Review found that investments that deliver financial results are closely correlated with those that are deemed sustainable (Investing For A Sustainable Future, 11 May 2016). Separately, a study by Barclays found that investment-grade bonds with higher ESG scores outperformed those with low ESG scores between 2007 and 2015 (source: MSCI).

One assumption by impact investing evangelists is that millenials are keener than their parents on the idea, and this is significant because a large volume of financial assets are expected to transfer from baby boomers to their millennial heirs over the next 30 to 45 years, with an estimated $30 trillion changing hands in North America alone. 

Millennials want to bring about changes with their investments, so surveys have stated: 52 per cent of US millennials believe they individually can make a difference globally (source: Telefonica Global Millennial Survey); some 61 per cent of this age group are worried about the state of the world and feel personally responsible for making a difference (source: Standard Life Investments). A survey by US Trust has shown that 28 per cent of millennials surveyed in 2016 use impact investments, up from 17 per cent in 2015.

O'Donohoe points to how big firms such as BlackRock - it has a director of impact investing - are throwing their considerable AuM muscle behind the trend. He would like to see more involvement from the world's wealth management industry in general. One problem, he says, is that there is a relative shortage of fund products and other channels for investors to pursue. It is important to recall that these are early days - it will take time for impact investing portfolios to generate track records that are credible and catch the eye. Trustees of pension schemes, for example, have a fiduciary responsibility to get the most bang for their investment buck, so the more data available, the better.

There remain dissenting voices. Back in 2012, Kevin Starr, writing in the January edition of the Stanford Social Innovation Review, published by California's Stanford University, opined: "Few solutions that meet the fundamental needs of the poor will get you your money back. Scalable rural livelihoods, basic health care, basic education solutions, clean water—with very few exceptions, you don’t make money off this stuff, sorry."

Despite such comments, it appears that the trend of impact investing is here to stay, particularly if doing well by doing good proves to be a credible trend over time. The controversy over impact investing is not over - which is perhaps healthy in any market where ideas should be tested - but impact investing advocates appear to have a spring in their step.