By Opportunity Zone Magazine Staff
The Kresge Foundation is staking $22 million to anchor two new Opportunity Zone Funds, in a bid to drive $800 million in new capital into distressed communities while increasing transparency and responsible investing in the OZ sector.
The investments will provide risk mitigation and first-loss guarantees for new funds from Boston’s Arctaris Impact and Fort Lauderdale’s Community Capital Management (CCM). In exchange, Arctaris and CCM will commit to impact covenants designed to ensure the funds create jobs and help local communities and will also provide public reports on the funds’ activities.
The goal is to create an ecolabel-style “impact certification designation for Opportunity Zones,” says Kimberlee Cornett, director of Kresge’s Social Investment Practice, and to establish best practices that go well beyond statutory OZ requirements.
“Our goal is to signal to investors that these are the kinds of things you should be looking for,” Cornett explains. “We made the investment in the hope that we’d be able to drive part of the Opportunity Zone market to those kinds of standards.”
Acrctaris and CCM were chosen from more than 140 applicants, and further partnerships could be in the pipeline. Cornett hopes the funds’ success will motivate both managers and investors to embrace transparent, impact-oriented models.
“We hope they’ll be more successful raising capital,” Cornett says. “We know that good community investments can provide a very stable return for long-term value investors.”
The long-term goal, says David F. Sand, CCM’s chief impact strategist, is to showcase best practices that could later serve as templates for revising the Opportunity Zone rulebook.
“The covenants we have agreed to might not be required by legislation or regulation, but we believe they should be,” Sand says. “We are going above and beyond to demonstrate to the market what this can look like when done right.”