Opportunity Zone Magazine Volume 1, Issue 3 - Page 70
70 OPPORTUNITY ZONE MAGAZINE | VOLUME 1 • ISSUE 3
THE TIME IS NOW TO SHOW THE VIABILITY OF OZs.
As the final Treasury regulations and multiple recent legislative
proposals aim to provide meaningful reporting, the time is now
for the industry to embrace OZ social impact measurement.
Nearly $2.3 billion went into OZs between early December and
early January due to the final regulations coming out – a 51%
increase from the month before. The recent market sell-off, after
the longest bull market in history, most likely means that many
investors may be sitting on significant capital gains that are
eligible for the benefits that OZ investments offer.
Additionally, investments that are counter-cyclical might become
more attractive in the uncertain economic environment that
has emerged. The COVID-19 crisis has clearly shown that there
is a link to a heightened focus on health, safety and doing good
as witnessed by many generous acts of kindness being carried
out to help those in need. Asset classes like affordable housing
and assisted living have historically held up well in an economic
downturn, and these types of assets are well suited for OZs – and,
by extension, this will build on the emphasis towards making a
positive social impact. Measuring and promoting the social impact
of the investments an OZ is making will only become more
important to investors as investment increases.
HOW TO BEST MEASURE SOCIAL IMPACT
Unlike previous community-investment initiatives, current
federal rules for OZs don’t necessitate investors meeting
affordability or job-creation mandates – nor do they require
OZ funds to report the social impact of their investments.
Several organizations have built social impact reporting
frameworks or offer consultant-like reports that showcase just
how much good a specific project might do.
These reporting frameworks are a critical step in the process,
however many of the resulting implementations are costprohibitive
for some. They’re also less standardized, specific,
and scientific than they could be, which certainly provides
the flexibility in application but may not provide a complete
picture. For instance: Are the frameworks capable of measuring
numerous specific, place-sensitive variables? Can they account
for a project’s efficiency in doing so? And, if everyone’s
using different contexts with different methodologies, are we
missing out on an opportunity to achieve some set of industrywide
standards, which can be benchmarked over time?
Today’s era of advanced technologies and analytics tools
enables something more algorithmic to be developed, which