Opportunity Zones | September 16, 2018

Kresge and Rockefeller identify opportunity fund managers for grants and support

Dennis Price
ImpactAlpha Editor

Dennis Price

The Kresge and Rockefeller foundations have identified 20 potential opportunity fund managers “driving positive outcomes in low-income communities” that could receive grants and support.

Such opportunity funds are the key to deploying capital into the new low-income opportunity zones designated under the Investing in Opportunity Act included in last year’s U.S. tax bill.

The foundations have committed up to $25 million in grants and guarantees to support the program. Kresge and Rockefeller did not release the names of the organizations under consideration. A Kresge Foundation spokesperson said not all of the funds would receive funding or investment.

Kresge and Rockefeller received more than 140 responses this summer to a call for letters of inquiry from “mission-aligned” fund managers that aim to improve the lives of people in low-income communities, deliver returns to investors and “evaluate the impact of investments over time.” As passed, the Investing in Opportunity Act does not require long-term impact reporting.

“Our goal is to identify funds that are focused on truly driving positive outcomes in low-income communities and on shaping the Opportunity Zones market to be one that is mutually beneficial to investors and residents of these communities,” said Kresge’s Kimberlee Cornett.

Added Rockefeller’s Lorenzo Bernasconi, “The number and quality of the responses is a testament to the enormous market interest and energy that exists around Opportunity Zones.”

Measuring impact

Impact measurement and data collection have emerged as key focal points of philanthropic foundation efforts to ensure the opportunity zone capital flows to projects that deliver inclusive prosperity in underinvested communities.

Last week, U.S. Impact Investing Alliance – backed by foundations including Ford, MacArthur, Heron and Kresge, as well as other organizations and family offices, submitted a letter to the Treasury Department, urging the agency to embrace basic data reporting and transparency for opportunity zones. The Alliance, which was involved in early conversations about the Act, is working with the New York Federal Reserve and the Beeck Center at Georgetown to develop a shared framework for measuring impact in opportunity zones.

>>MORE: Mission Investors Exchange will explore the role of philanthropy in opportunity zones in an Oct. 4 webinar.

Twenty of the 141 applicants to Kresge and Rockefeller pitched opportunity funds targeting national markets. About a dozen targeted regional investments. The vast majority put forward state or local funds. The inquiries spanned asset classes, including real estate, venture capital, small business, private equity, green energy, infrastructure and more.

At least some of the 20 selected organizations will get a grant-funded package of technical support that includes advisory services on legal, accounting, reporting and capital raising. Kresge is considering making a number of impact investments, likely in the form of guarantees, for a smaller subset of capital aggregators.