WHEN investors gathered in Amsterdam in late 2016 for perhaps the largest annual conference on “impact investing”, the mood was upbeat. The concept of investing in assets that offer measurable social or environmental benefits as well as financial returns has come a long way from its modest roots in the early 2000s. Panellists at the conference included, among others, representatives of two of the world’s largest pension funds, TIAA of America and PGGM of the Netherlands, and of the asset-management arm of AXA, a French insurance behemoth. A niche product is inching into the mainstream. In the past two years BlackRock, the world’s biggest asset manager, launched a new division called “Impact”; Goldman Sachs, an investment bank, acquired an impact-investment firm, Imprint Capital; and two American private-equity firms, Bain Capital and TPG, launched impact funds. The main driver of all this activity is investor demand. Deborah Winshel, boss of BlackRock Impact, points to the transfer of wealth to women and the young, whose investment goals, she says, transcend mere financial returns. Among institutions, sources of demand have moved beyond charitable foundations to hard-bitten pension funds and insurers.

The sector has also been boosted by increased attention from policymakers and the development of industry standards. International organisations—such as the UN, and a global task force founded under the aegis of the G8—have promoted impact investment. Bodies such as the council of investors and borrowers that sets the Green Bond Principles, guidelines for bonds earmarked for environmental projects, have helped set common standards.

Definitional squabbles still plague the impact community. For sticklers, investment only deserves “impact” status if it delivers both near-market level returns and strict measurement of the non-financial impact: eg, of the carbon emissions saved by a renewable-energy project; or of the number of poor people who borrow from a microcredit institution. Others, however, include philanthropic investment, where financial returns are sacrificed for greater social benefits; or less rigorous types of do-good investments.

Such disagreements make it hard to gauge the true extent of impact investment. For instance, BlackRock Impact and Goldman both also offer two looser investment categories: “negative screening” (ie, not investing in “bad” sectors—say, tobacco or oil); and “integrated” investments that take environmental, social or governance (ESG) considerations into account (eg, by selecting for firms with, say, good working conditions). Neither firm, however, provides a complete breakdown of these categories by assets under management.

The industry is also held back by a restricted choice of asset classes, and by the limited scale of investment opportunities. According to a survey by the Global Impact Investing Network, which organised the conference in Amsterdam, investors were managing $36bn in impact investments in 2015. But the median size of investment remained just $12m. Urban Angehrn, chief investment officer of Zurich Insurance, says the Swiss firm has had trouble fulfilling its pledge to commit 10% of its private-equity allocation to impact investments.

Cynics may still dismiss impact investing as faddish window-dressing. Of Zurich’s $250bn-plus in assets under management, only $7bn-worth are classified as impact investments. At Goldman’s asset-management arm, impact and ESG-integrated investments combined only make up $6.7bn out of a total $1.35trn in assets under management.

But that is to ignore the scale and progress that large institutional investors have brought to impact investing. Although $7bn is a tiny slice of Goldman’s portfolio, it is huge compared with the investments of even well-established impact specialists, such as LeapFrog, whose commitments total around $1bn. And the entry of hard-nosed financial giants sends an important message about impact investing: that they see it as profitable for themselves and their clients. It is not enough to make investors feel good about themselves; they also want to make money.