Mission, Money & Markets: What should unite Opportunity Zones backers and detractors
Editor's note: A version of this blog post also ran on Impact Alpha here.
By Aaron Seybert
The Opportunity Zones’ conversation over the last few days (since the New York Times published this piece, which includes a quote from me) has served to further divide the community development and investment sector into two entrenched camps. The proponents of Opportunity Zones feel the article was unfair -- that it cherry-picked the most damning examples of investors perverting the incentive. The detractors claim, as they have from the beginning, that this is nothing but a massive give-away to the already rich and that the proponents are the ones cherry picking their positive examples to prop-up an inherently flawed piece of legislation.
My quote in the piece fell more in line with the second group. My more nuanced view (which I suppose couldn’t be conveyed in a single quote) is somewhere in the messy middle. Both arguments have validity. Depending on your ideological, political, or economic interests, you can pick the facts and examples around Opportunity Zones that most confirm your bias and dismiss the critiques you disagree with.
When evaluating policy, facts without context provide little value. Of course, there will be bright spots -- just as there will be bad actors. The problem is we don’t know, and won’t know, who the outlier is and who is the status quo. It’s high time we as an emerging sector acknowledge that. Anecdotal evidence about good actors or bad actors will not suffice. I believe anyone who cares about this legislation producing sustainable, positive impact in communities should be asking for mandatory disclosure. Without the knowledge of where the money came from, who raised it, and where it went, how can we possibly hope to know if this incentive is helping or hurting on the whole?
This need for a reporting mandate should unite intellectually honest people in both camps. For those who believe this is truly a tool for transformative and positive change, they should want the evidence to support that claim and to stem the tide of negative public opinion which, ultimately, threatens the existence of the incentive. For well-intentioned detractors, they should openly embrace a powerful, scalable tool that could deliver the financial equity we have so desperately needed in this sector, if they can see via data that it is delivering on impact.
Kresge has supported leaders who have created voluntary reporting systems and market norms that we believe could help to solve the issue. But it’s become clear that voluntary action is not enough. It’s time we collectively demand mandatory reporting at the local, state, and federal level as our singular focus. We can’t accept that the politics are too hard. The same was said for decades for creating and expanding community development finance tools. People often say, “We need to protect what we have and make it work.” I no longer accept that.
I particularly don’t accept that large philanthropies should simply go along with trying to make this work. There is a huge moral hazard in standing up relatively small examples of “best practices” as being emblematic of the industry. We don’t know that to be true. No one does. “Green-washing” the industry allows bad actors to hide under the veil that the social sector creates in public perception.
We should absolutely support the best actors to show a path forward. However, we in philanthropy should just as forcefully demand mandatory reporting at every level and remain extremely sensitive to what we lend our name to. We should fund advocacy organizations, investigative journalism, and think tanks to increase the reputation risk for policy makers and practitioners and insist this debate continues in the public eye.
In the absence of a fully transparent market, I will remain skeptical but engaged. The history of our country (or of this administration) does not justify defaulting to the assumption that this will work out fine. We seek to partner with other like-minded organizations who are not content to sit on the sidelines and see all the potential benefits as well as the perils. My modus operandi is: Engage, support the best and brightest, demand transparency, stay vigilant, and be careful who you associate with.
Aaron Seybert is a social investment officer at The Kresge Foundation. Follow his team on Twitter @kresgesocinv.