By Marie Ekberg Padilla

Fran Seegull, executive director of the U.S. Impact Investing Alliance, began her journey into impact investing more than 20 years ago at Harvard Business School. There, she first explored how the idea that financial capital markets and for-profit business models could create positive social, economic and environmental impact.

“I firmly believe that the future of investing is impact investing, and I think that the more we work to build and scale the impact investing market with integrity, the closer we will get to finding that solution (for income inequality and other mounting challenges)” she said.

For the alliance, Opportunity Zones (OZ) present the chance to engage a new wave of investors in impact investing and, by doing so, will lift up the voices of residents and workers currently living in these zones, she said.

“The excitement around this policy is drawing in folks who never would have called themselves impact investors before but who see the potential for capital to spur economic dynamism in communities that have been overlooked for too long,” she said. “To succeed in that – and for the policy to succeed – we believe that there needs to be authentic community engagement at every step.”

What do you think the OZ program can do for our country and people in distressed areas?

OZs have drawn a lot of attention, and we can already see capital flowing to communities that had long been overlooked. For example, consider that about three quarters of all U.S. venture capital goes to businesses in just three states – California, New York and Massachusetts. If successful, the OZ program can help improve the even flow of investment capital and boost entrepreneurial activity across the country.

Thanks to this policy, we are hearing about a wide range of projects in both rural and urban areas seeking to solve affordable housing shortages, revitalize vacant properties, reduce rates of recidivism, promote sustainable agricultural practices and more.

We believe the OZ program can give more people across the country an opportunity to start and grow businesses, bringing economic dynamism back to these communities and helping to ensure everyone has a shot at the American dream.

How can we measure the success and impact of the OZ initiative and how important is it to establish reporting requirements?

Data is absolutely critical because it’s not enough to just say how many billions of dollars flowed into OZs. For a variety of reasons, we also need to be able to show the impact of that capital in those communities and how it has helped lift up residents.

First, access to transparent data is the backbone of an efficient market. Reporting requirements, whether voluntary or mandatory, can help us get that data. The more standardized the reporting requirements are the better, because it allows investors and policymakers to use that data to then compare and contrast different investments and communities and learn what works and what doesn’t.

Second, authentic community engagement is only possible when we have transparent data and when stakeholders are empowered to hold funds accountable to their impact commitments.

And lastly, we can already see the risk posed by a lack of clear data – without it, the press has gravitated towards stories about bad actors and there has been less attention paid to places where Opportunity Zones are succeeding. If we only see the negative narrative, it’s easy to imagine a future administration or congress bringing the policy to an end.

What is the Opportunity Zones Reporting Framework and what does the alliance hope to achieve with these?

The Opportunity Zones Reporting Framework is a voluntary guideline designed to define best practices for investors and fund managers looking to invest in OZs. The framework includes a set of guiding principles and a detailed impact measurement framework that is freely available for anyone that would like to use it. These guidelines include common-sense best practices such as:

Community Engagement: Opportunity Fund investors should request that fund managers integrate the needs of local communities into the formation and implementation of the funds, reaching low-income and underinvested communities with attention to diversity.

Transparency: Opportunity Fund investors should be transparent and hold themselves accountable, with processes and practices that remain fair and clear.

Measurement: Opportunity Fund investors should voluntarily monitor, measure and track progress against specific impact objectives, identifying key outcome measures and allowing for continuous improvement.

We know that every investment and every community is different. We hope that by creating a holistic framework for best practices we can help shape and define the OZ market in a way that works for everyone, not just investors and fund managers.

The framework was developed in collaboration with the Beeck Center at Georgetown University and the Federal Reserve Bank of New York, and in consultation with more than three dozen investment and community leaders.

Do you think we’ll see a third round of OZ regulations?

Our sense is that there will not be a third round of regulations, but we expect the final rules to be published before the end of 2019. Of course, the alliance’s paramount concern is data collection and reporting requirements, but our public comments included several other items of importance.

For one, we would like to see greater clarity about the types of activity that might be defined as abusive, such as land banking and other practices clearly in contrast to the policy’s intent to uplift economically distressed communities.

Additionally, the opaqueness of the operating business rules has kept capital on the sidelines. We hope to see some clarity for investments into operating businesses for the benefit of investors, developers and fund managers, but also for the health of the OZ market as a whole.

The creation of OZ has spurred us to rethink how we attract and leverage capital into communities. This policy has encouraged policymakers, investors and residents to have frank dialogues about their priorities, and it has strengthened the investment ecosystems of cities, states and regions around the country. Regardless of what’s next for this specific tax incentive, we should be determined to harvest the lessons of this moment and build on them into the future.