Giving Compass' Take:

• As impact investing in the development field continues to grow, experts want to make sure that investments in high-risk places are accountable and providing the greatest social impact possible. 

• What are the potential harms of impact investing without accountability mechanisms?

• While not all impact investing is inherently bad, there are some problematic trends with this practice. 

The impact investing community needs to create innovative accountability tools to deal with high-risk environments and ensure their investments are delivering positive social and environmental impacts.

This was the message delivered by Natalie Bridgeman Fields, founder and executive director of Accountability Counsel, and Gayle Peterson, director of social finance and impact investing programs at Saïd Business School.

Peterson and Fields said that as the impact investing field grows and begins to provide much-needed private capital to enterprises operating in high-risk sectors and countries, effective mechanisms need to be put in place to make sure these private investments have positive impacts and do not unintentionally cause social and environmental harm.

Development finance institutions, which until recently were the only investors operating in the development space, have accountability offices in place to respond when things go wrong, after 50 years of experience in the space.

Fields and Peterson called on investors to start thinking about how to set up such tools, which should be a “benefit for investors to understand what problems are as early as possible and address them and learn from them so they are not repeated in future investments,” Fields said. An accountability framework can also help investors “co-create projects with communities” instead of imposing them from a distance, she added.

The current accountability gap in the impact investing space also creates the opportunity for investors to innovate and develop new mechanisms, Fields told Devex. She also said each investor does not need its own tool, but instead hopes the sector will move to create one that could be run independently, cheaply, and efficiently and can be used as a collective resource shared across the field to prevent repeating mistakes, she said.

Read the full article about creating accountability tolls within impact investing by Sophie Edwards at Devex International Development