Impact investing faces an existential threat and we are sleepwalking into it. Low accountability for impact is leaving us wide open to attack at the first sign of trouble.

The experience of the charity sector should certainly give us pause. Charities have been caught on the hop - headlines decrying high salaries or incompetence (Kids Company, Marie Stopes) abound - and cannot effectively be countered with a compelling account of what the charities achieve with their money. A musical about the decline of Kids Company goes on stage this summer at the Donmar Warehouse, we are both appalled and fascinated by these examples.

In the court of public opinion, it is not hard for the Government to start cutting grants that sound wasteful when the defense has no compelling evidence, as happened this month

Public trust in charities is going downhill, but it is unthinkable that charities as we know them will disappear. The abiding sense that these are organisations with the essential purpose of doing good remains. Charities may sometimes screw up, hire the wrong people, fail to meet professional standards but surely these are bad decisions made with good intentions? Why else would charities exist? And aren’t they regulated? And doesn’t your aunt volunteer for a local charity? They can’t be all bad.

The more cynical among us may not be so easily convinced, but I find it unlikely that the charity sector is going to suffer anything more than an unpleasant kicking.

By comparison, impact investment has none of this automatic, occasionally misplaced, trust. We are not rooted in the community, we do not have hundreds of years of history, we even *gasp* try to make money.

I can tell you that, like many impact investors, NIM does indeed take impact very seriously, as seriously as financial returns. I can describe to you our impact assessment process, our requirement for companies to enshrine social impact in their articles, our divestment policy for when things go wrong. But we do these things because we want to, because we believe this maintains our focus on impact. No one makes us do this. And to me that is too fragile, I want to be held to account for the impact I claim we achieve.

There is currently a surge of interest in impact investing with everyone from big banks to boutique wealth managers offering impact investment products

This is the moment when we can capitalise on asset owners’ willingness to take a bit more risk in return for doing a bit more good. Resources are growing and we are forgiven many of our weaknesses on the basis of youth. This gives us a freedom to innovate to develop our field, but also a great responsibility to do so in a way that will build a solid, differentiated and defensible foundation for future investors and managers to build upon. This is a moment that must not be wasted.

The Impact Management Project coordinated by Bridges Ventures, that we are supporting and participating in, will hopefully make 2017 a year when we take a huge leap towards an agreed convention for understanding and expressing impact. We are also excited to be working with organisations driving the development of the Impact Investment market such as Big Society Capital and the European Investment Fund who take this problem seriously, and whose influence is felt well beyond their own portfolios.

From what I have seen I think we can and will build a robust accountability framework for impact investors. The will is there. But I worry sometimes that the urgency to establish such a framework is not felt keenly enough across the sector.

For impact investing, the cost of failure really could be painfully high

Where robust accountability structures don’t exist, or are ignored, there is a real risk that there will be scandals. Impact investing, doesn’t yet have these structures, yet like any form of investing, involves risk and so we are vulnerable to Kids Company moments and crises of confidence. Moments when the sceptics jump at the chance to say ‘we told you this was all a smokescreen for making more money’.

We must be ready. Ready with robust evidence and ready with the accountability mechanisms that mean people don’t have to take what we say on faith. If we don’t, then then we may disappear as an industry altogether. Another bright idea that turned out to be too good to be true.

This blog was originally published on the Nesta Impact Investments website. Read the original blog.