Opportunity Zone Magazine Volume 1, Issue 3 | Page 69
WHY AND HOW WE
MEASURE SOCIAL IMPACT
By Reid Thomas
Impact Measurement standards are essential for fulfilling the initiative’s promise to empower U.S.
communities that have long been left behind.
Some might look at the Opportunity Zone market and
focus on its benefits in deferred capital gains taxes and
financial returns. However, for many OZ fund managers and
investors, social impact is already an important consideration, and
its level of importance is increasing over time. The bottom line is
that impact investors care about real and objective quantitative
results, and fund managers – whether focused on impact or not –
care about seeing the OZ initiative being extended. Measurement
and reporting of those results need to be increased for the longterm
viability of the OZ market.
This aligns with the primary goal of the OZ initiative as it
continues to receive bi-partisan support: to incentivize economic
development and growth in distressed communities, previously
overlooked by investors. However, some people in the industry
have pushed back on measuring and reporting due to perceived
increased burdens and costs. With advanced technologies,
algorithms, and available tools, there are ways around this concern
today, pushing the industry to expand toward the bigger goal
behind the OZ initiative.
So, how can participants best measure social impact in OZs? What
are the four critical elements that need to be evaluated, and why
do those measures need to be standardized and scalable? How can
the industry best achieve the right blend of financial returns and
social impact while investors, fund managers and policymakers
benefit from this data?