Opportunity Zone Magazine Volume 1, Issue 3 | Page 71

WHY AND HOW WE STRATEGICALLY SHOULD MEASURE SOCIAL IMPACT IN OZS 71 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. 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 MEASUREMENT 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 IMPACT 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. OPPORTUNITYZONE.COM