Opportunity Zone Impact Reporting Frameworks

October 7, 2020
Impact Reporting

The chorus of voices advocating for changes to Opportunity Zone rules to require impact reporting continues to grow. Without these metrics, arguments that Opportunity Zones are driving positive (or negative) economic impact are mostly speculative. Impact Reporting would provide the data needed to definitively prove the effectiveness of driving capital into regions of need via this historic tax incentive.

A Few Proposed Reporting Frameworks:

The IMPACT Act: Senator Tim Scott, one of the original architects behind Opportunity Zone legislation, along with a team of bipartisan politicians has proposed one potential solution to the need for standardized reporting for Opportunity Zones; the IMPACT Act. This bill includes a variety of reporting requirements that would provide more robust and granular analysis over time of the impacts of investments in Opportunity Zones.

“The IMPACT Act’s reporting requirements will help show communities and investors that the initiative is working, as well as help root out any fraud or abuse. This is an important piece of the puzzle to help the more than 31 million Americans living in Opportunity Zones experience a brighter future.” said Senator Tim Scott.

The IMPACT Act would require specific data to be reporting annually by OZ investors, OZ Fund Managers, and the US Department of Treasury. This Act would also require the Treasury to publish comprehensive reports every five years evaluating the impact of OZ investments regionally and nationally.

“As a fifth generation Coloradan who grew up on the Eastern Plains, I know how important it is to attract growth to local communities, and particularly rural communities, in Colorado and throughout the country,” said Senator Gardner. “The IMPACT Act will provide new data on Opportunity Zones, so we can make them as effective as possible at encouraging investment, inciting growth, and extending opportunities for communities across all four corners of Colorado.”

Impact Rate of Return: Another suggested reporting framework is IRR proposed by NESF & Howard Buffet. IRR (Impact Rate of Return) is a system Howard Buffet created and has used in various private and public sectors. “Tracking impact is the right thing to do because of the potential benefits to project management that may further improve community conditions.” IRR helps organizations calculate how efficient their financial allocations are at accomplishing social, environmental, and economic goals.

OZ Reporting Framework: The Opportunity Zone Reporting Framework is the brainchild of three organizations; The U.S. Impact Investing Alliance, the Beeck Center for Social Impact + Innovation at Georgetown University, and the Federal Reserve Bank of New York. This tool is specifically focused on how Opportunity Fund managers can thoughtfully deploy the capital they raise from investors. Fund managers will be responsible for identifying and tracking Opportunity Zones investments and as such will be well placed to collect basic market and impact data. Proactive efforts to do so will enable fund managers and their investors to understand the impact of investors and enable independent evaluators and researchers to more deeply analyze the long-term outcomes of the overall policy.

The Future of Opportunity Zones:

One thing is clear, OZ investors and fund managers can anticipate the implementation of some sort of standardized reporting framework to remove speculation from the conversation about the impact of opportunity zones. At Four Points Funding, we are looking forward to this process and having the data to substantiate the impact of our investments. Despite the recent politicization of Opportunity Zone incentives, we believe strongly that our portfolio of multifamily housing and lodging projects meets the original intention of Opportunity Zone legislation and supports long-term regional economic growth.

For questions about the potential impact of future reporting frameworks, reach out to a member of the Four Points Funding team.

Interactive Opportunity Zone Map