Opportunity Zone Magazine Volume 1, Issue 3 | Page 71
WHY AND HOW WE STRATEGICALLY SHOULD MEASURE SOCIAL IMPACT IN OZS
means the costs of implementation and time to market can
be dramatically reduced. A good solution should tell investors
the impact effectiveness of their investment per dollar spent
– an ROI of sorts displayed via an easy-to-read mechanism:
as one number on a scale. The algorithm should consider the
current market environment, and data from crucial aspects of
an OZ project, including location, development type, census
tract and investment size, and time.
In a purpose-built fund
administration platform for
OZs, a social impact tracking
and reporting capability
should be included.
In a purpose-built fund administration platform for OZs, a
social impact tracking and reporting capability should be
included. This type of dashboard will help fund managers
and investors get the full picture of their OZ investments.
This can help all stakeholders. It will certainly help to attract
additional impact-focused investors by proving the social
benefits of the funds and it will help fund managers and
developers in working with local municipalities to get projects
off the ground.
having a standardized measurement of impact can only benefit
these investors. A clear, thorough, real-time view of a given
project’s efficacy can help fund managers create a blend of
developments that balance desired financial returns with
SOCIAL IMPACT MEASUREMENT IS VITAL TO THE OZ
INITIATIVE’S LONG-TERM SUCCESS
We need to demonstrate that OZs are doing the good they’re
supposed to – in an objective, transparent, standardized,
scalable, and specific way.
Standardized tools might offer a path forward. These tools can
help government officials evaluate the projects most worthy of
funding (and bolster the OZ initiative’s continued existence)
and can empower fund managers with real-time reports for
use in marketing and planning efforts. For investors, it offers a
transparent, easily understood tool for making more informed
decisions with their money.
Scaling up such a solution – and making it a standard,
automatic practice – is what’s next. It will require all of us,
industry and government alike, to come together for the good
of those communities most in need.
The appetite for OZ investment, and the push toward social
impact, is stronger than ever. Industry participants have the
capabilities, technology, and drive to show that OZs are doing
the good they are supposed to do. Now more than ever, we
need to measure this social impact. Let’s get it done.
MOVING TOWARD A STANDARDIZED, SCALABLE
Getting to full-scale adoption of impact tracking and reporting
tools is possible through regulation or legislation. However, it
is also possible, and arguably preferable, if stakeholders drive
the adoption. For this to happen, barriers to adoption need
to be removed, and incentives need to be aligned between
investors, fund managers, developers, and government.
Algorithmic-based solutions that are compliant with broader
industry frameworks go a long way to achieve these goals.
By their nature, they can be implemented quickly, and –
when done so properly – at virtually no incremental costs.
The solution also creates a platform to enable fund managers
to work together with investors and government entities to
optimize investments to benefit all stakeholders
FINDING A BALANCE OF FINANCIAL RETURNS AND SOCIAL
Of course, even for an investor base increasingly interested in
social impact, financial ROI is crucial. Some may worry that
as this social impact goes up, returns will go down. Again,
Reid Thomas is chief revenue officer and managing director
of NES Financial, a JTC Company, where his focus includes
technology-enabled EB-5, 1031 and Opportunity Zone
Fund administration. NES Financial is a specialty financial
administrator that serves sectors characterized by high
administrative complexity, increased transaction security need
and challenging regulatory compliance requirements.