OZ Fund Managers Need to Hone Their Message

Stakeholders in Opportunity Zones are pleased with their investments but fund managers could still do a better job of communicating the benefits of OZs not only to current investors but also potential ones as well, according to a report from JTC Americas and OpportunityDb.

The report presents results from a survey of 145 participants,  including investors, developers, brokers, fund managers, bankers, advisors, and other relevant stakeholders from across the country. They were asked about what investors understand about OZs, what they don’t, and how the industry can better communicate the initiative’s impact on communities 

One conclusion: Lost in all the hubbub has been that OZ investments are impact investments. 

With interest in impact investments and ESG continuing to skyrocket, that’s important for fund managers from a marketing, education, and, ultimately, an investment-raising standpoint, according to the report.

Plenty of Early Success Stories

It is easy to understand why this piece has been missing. Despite some early success stories, there have also been a series of deadlines and regulatory changes—final regulations weren’t passed until 2019—as well as new proposals. And, there has also been heated debate over whether the program is meeting its original mission. 

Here is where better messaging would work, the report finds. 

OZs “provide opportunities in communities otherwise overlooked for development investment potential,” said one survey respondent. 

Fund managers need to harness these messages in communications with current investors and prospects to help them understand the impact OZs can make, which will help raise capital and help OZs reach their full promise. 

Communicating Impact Measurements and Benefits

Fund managers need to communicate proactively with current and potential investors—particularly around impact measurement and benefits, the survey found.

When asked at what stage OZ fund managers communicate the community and social impact to investors, 33% were unsure, 10% said only once the fund is set up, and 7% said never. 

Yet this is a crucial piece of information for investors; when the survey asked respondents how to make OZs more valuable to impact investors, “quantifying impact,” “clear metrics,” “match ROI to impact” and “improve reporting” were among the most common responses. 

Many respondents did not intuitively link OZs with impact investing. Despite understanding the impact benefits of OZ investments, when asked about their level of familiarity between impact investing and OZs, about half (48%) of all respondents said they were only somewhat familiar; 26% said they were not familiar and 27% said they were very familiar. 

Investor Opinions Overwhelmingly Positive

Investors have an overwhelmingly positive perception of OZs, though. When asked about their personal perception of OZs, 4 out of 5 respondents said mostly or very positive, with 74% summarizing the program as an equally advantageous solution for communities in need and wealthy investors. 

But there’s work to be done when it comes to communicating these benefits: existing OZ investors were more bullish on OZs (86% viewed them mostly or very positively) than aspiring investors (72%) and non-investors (65%). 

When asked if OZ incentives are enough to make them consider investments they would not make otherwise, 68% of existing and aspirational investors agreed that would be the case. 

Fifty-seven percent said the same when asked whether the incentives are enough such that a project that would not otherwise work seems attractive. 

Most investors would also be willing to take a significantly lower return for a good impact project, like OZs. Over half (54%) of investors would be willing to accept a lower financial return if they were investing in a good impact project – and over 30% would take a reduction of over 25%.