While opportunity zone investments have become wildly popular, the core values of the investment model call for social impact investing. Catalyst Opportunity Zone Funds has created a social impact scorecard to ensure it is meeting both community and investment needs on opportunity zone projects. The scorecard measure the needs of the community, ensure those needs are met with the project and delivers market-rate returns to investors.
"We have an impact scores card and measurement framework that we invested a lot of time and energy to create over the last six to nine months," Jeremy Keele, managing director at Catalyst, tells GlobeSt.com. "It does a few things. On the one hand, it identifies community needs in a particular zip code or census track. That could mean that local residents don't have healthy, nutritious foods from a grocery store or that there are affordability issues for housing. The second part is an impact underwriting assessment tool that allows us to under stand how the project will address the needs. That receives an objective score based on a data set that we have access to."
In addition to weighing social needs when identifying and underwriting opportunities, the firm's model also tracks the ongoing needs and impact of the investment. "The third piece is an ongoing reporting and measurement tool and how the community is evolving over time and how our investment is moving the needle over time," says Keele.
The firm's focus on social and community needs hasn't hurt returns. By leveraging the tax benefits of the opportunity zone model, Catalyst's investments also deliver solid market-rate returns to investors. "The original thesis for the legislation was that if it is marginally profitable to work in some of these communities in the past, the tax incentive would close the financing gap, making it more attractive to more conventional investors," says Keele. "We are identifying deals that have both market rate returns and the ability to deliver measurable impact in the community. In the last year while doing the sourcing work, we have been able to find those opportunities—more than we have capital or capacity to invest in."
Not all investors are following this path. Some markets on the opportunity zone list have already been gentrified, affording investors the ability to gain the tax benefits without the risk of investing in a community of need. According to Keele, this misses the point. "There is a lot of narrative nationally, the people investing in gentrified zones really misses the opportunity," he says. "There are communities that really need the investment, and they are places where you can find investment opportunities that is positively making a difference."
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Kelsi Maree Borland
