One of the key concerns about opportunity zone funds is the impact these investments will have on the neighborhoods in which they operate.

Do they benefit the community or extract value from it, perhaps accelerating gentrification and making the community unaffordable for the residents they are supposed to help? That’s the fear of some New York City residents and politicians opposing construction of an Amazon campus in the Long Island City neighborhood of Queens.

(Related: Opportunity Zone Funds: Will They Provide the Impact Investors Expect?)

Investors in opportunity zone funds enjoy several tax benefits, including the deferral of capital gains from a previous investment and a stepped-up basis for the opportunity zone investment. But those investments are meant to serve another purpose as well: to promote economic development in low-income neighborhoods.

There is, however, no requirement in the federal statute that created opportunity zones to account for their local impact,  which is why a group of members and supporters of the U.S. Impact Investing Alliance and its partner, the Beeck Center for Social Impact at Georgetown University, developed an Opportunity Zones Reporting Framework.

The framework consists of voluntary guidelines for best practices of opportunity zone fund managers to help achieve “positive economic and social outcomes in distressed communities,” according to the statement announcing its formation.

The framework recommends that fund managers:

  • Proactively report information that will encourage effective market formation and enable community engagement before and during investments
  • Commit to tracking and reporting basic transaction‐level data, a core set of community impact metrics that are widely applicable to opportunity funds and additional metrics applicable to the specific investment thesis  and impact vertical(s) of the fund
  • Seek opportunities to create durable community benefits by prioritizing responsible investment exit strategies where feasible
  • Commit to working forthrightly and transparently with independent evaluators and researchers.

(Related: How to Reduce Clients’ Taxes While Providing a Social Good)

The framework is based on five core principles: community engagement, equitable community benefits, transparency, measurement against specific objectives and fund metrics “to track real change.”

Fran Seegull, executive director of the U.S. Impact Investing Alliance, likens the framework to the United Nations Principles for Responsible Investment, commonly known as the UN PRI, which supports a network of more than 1,800 asset owners, investment managers and service providers who incorporate ESG factors into their investment and ownership decisions.

“By  introducing these consistent data points at the inception of opportunity zones implementation, we can ultimately gain a deeper understanding of activity across the opportunity zones landscape — what is working, where hidden barriers lie, and where policy adjustments or enhancements may be needed,” according to the framework.

The Alliance and Beeck Center for Social Impact developed the framework with input from many proponents of opportunity zone funds including wealth managers, asset managers, community stakeholders, the Federal Reserve Bank of New York, the Rockefeller Foundation and the Economic Innovation Group, which is credited with developing the opportunity zone concept.

— Check out

Trump’s ‘Opportunity Zones’ Tax Break Is Under Assault in NY on ThinkAdvisor.