13/07/2016 08:00 BST | Updated 22/07/2017 06:12 BST

Why millennials are providing the tipping point for Impact Investment

This is truly significant: estimates suggest that if we are to tackle the world's most pressing issues - from the refugee crisis to climate change - an additional $2.5 trillion of funding must be found. To fill this gap it's imperative we look at new financial models which are able to harness the scale of capital markets to drive social change. Impact investment is just such a model and our societies and planet are reliant on this sector taking a lead in delivering change.

The Global Steering Group on Impact Investment brought together 13 countries last week in Lisbon, Portugal, along with leaders from the worlds of finance, business and philanthropy, and government. This follows hot on the heels of the recent Vatican Impact Investing Summit last month.

This increased attention is an indication of the level of excitement and momentum led by a rapidly changing investment landscape. Capital markets are evolving, and beginning to look not just at risk and return but also at the social and environmental impacts of an investment decision. This has opened up the opportunity for innovation, which impact investment is filling. The Global Impact Investing Network estimates that there will be 12,000 impact investment transactions this year; nearly 3 times the number of deals in 2014. The amount of money in impact investments will increase to $17 billion, up from $10 billion. In my speech to the Lisbon conference, I said that this growth is driving every significant mainstream manager such as Goldman Sachs, Blackrock, and AXA towards some version of impact investment.

This represents unprecedented growth. Governments, investors, and philanthropists are all now seeing the potential for impact investment and they are taking action to get ahead of the trend.

Much of this growth is driven by changing demographic trends which are radically altering the investment landscape. In the future, our stereotyped notions of what an investor 'looks like' will be overturned by a new millennial generation which is already beginning to set in train a new future for investment: with social and environment impact, as well as financial return, at its heart. There are three reasons for this.

Firstly, we are increasingly seeing the growing financial influence of millennials at work as they come of age. As they work their way up the professional ladder into more senior positions in the financial industry, this will only increase.

Secondly, millennials will have the resources to give them real financial clout. A huge volume of financial assets are expected to transfer from Baby Boomers to their millennial heirs over the next generation - with an estimated $30 trillion changing hands in North America alone according to Accenture.

Thirdly, this group is not content with the status quo. Millennials by their nature have a mind-set which is positive about their ability to make a difference globally. This is not just natural optimism that goes along with youth - millennials genuinely feel empowered, and compelled, to change things. According to research by Standard Life Investments, 61 per cent of millennials are worried about the state of the world and feel personally responsible for making a difference. Impact investment offers this group an opportunity to not only have a hand in driving change, but also to ensure that businesses, governments, and other organisations are held to account for the outcomes they deliver.

This combination of power and attitude is driving impact investment forward already. 28 per cent of high net worth millennials surveyed by the US Trust in 2016 use impact investments, up from 17 per cent in 2015. Though it is too early to tell if this is a long-term trend, it is an indication of what may come.

What investment will look like in the future is likely to be radically different, with the impact investment market expected to grow significantly over coming years, to as much as $3 trillion. The UK market, where the Government has been active in putting in place incentives for impact investment, and where there is an established social investment wholesaler in Big Society Capital, is expected to grow by 30-40% every year in the current forecast.

Investors are increasingly asking themselves, then, an additional question. Not just the questions of risk and return; but that of risk, return and impact. As this change accelerates its potential scale can be truly transformative in terms of our ability to address some of the world's most intractable global challenges. We all need to ensure that we create the right environment for this to happen.