The 2023 Opportunity Zone Impact Survey, With Reid Thomas

Investing in ways that align with our personal values is an important aspect of portfolio construction. But the ESG movement may be muddying the waters.

Reid Thomas, managing director and chief revenue officer at JTC Americas, joins the show to discuss a new report from JTC and OpportunityDb that offers the results of our 2023 impact investing survey.

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Episode Highlights

  • JTC’s role as a specialty fund administration platform for the Qualified Opportunity Funds industry.
  • The trouble with ESG, and why it often gets conflated with impact investing.
  • Key takeaways from the 2023 impact investing survey.
  • The inherent subjectivity of different impact investing reporting frameworks.
  • Get the report by attending JTC’s upcoming webinar.

Guest: Reid Thomas, JTC Americas

About The Opportunity Zones & Private Equity Show

Hosted by OpportunityDb and WealthChannel founder Jimmy Atkinson, The Opportunity Zones & Private Equity Show features guest interviews from fund managers, advisors, policymakers, tax professionals, and other foremost experts in Opportunity Zones and the broader private equity landscape.

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Show Transcript

Jimmy: Welcome to “The Opportunity Zones & Private Equity Show.” I’m Jimmy Atkinson. Impact investing, it’s important to many investors. And likely with many of my listeners and viewers, investing for impact, or, put another way, just merely investing in ways that align with our personal values, is, frankly, it’s an important aspect of portfolio construction for many of our audience of high-net-worth investors. Now, that said, impact investing, and more specifically, the three letters ESG, have become political hot potatoes recently.

So, joining me today to discuss impact investing and ESG is Reid Thomas, chief revenue officer and managing director at JTC Americas. Reid’s normally joining us from San Jose, California, but today he comes to us all the way from JTC Group’s global headquarters on the island of Jersey in the English Channel. So, hey, Reid, great to see you. Thanks for coming on the show. How’re you doing?

Reid: Thanks for having me, Jimmy. It’s always fun to be here. I’m loving Jersey at the moment. It’s a lot smaller than San Jose, California, but it’s got its charm, that’s for sure.

Jimmy: I’m sure it does. I’ve never visited, but you’re inspiring me. I kind of wanna make a trip out there at some point.

Reid: You should. It’s great.

Jimmy: But anyways, let’s dive in for today, Reid. I wanna talk about impact investing, and specifically the results of JTC America’s impact investing survey in a moment here. But first, I’m sure most of our audience of high-net-worth investors and advisors have some familiarity with JTC Group already. But for any who aren’t yet familiar, can you give us a brief introduction to what services JTC provides for the alternative investment industry, for the Opportunity Zones industry? And what is your role at the company? I understand you recently took on a new role there.

Reid: Yeah. So, JTC is a publicly-traded company, listed on the London Exchange. We have a market cap of about a billion dollars. The business is basically divided into two halves. There’s a private client, private wealth division, where we service clients with many of their financial needs, be it private office, family office, or just individual clients. On the other side of the business is an administrative business, where we service institutional clients. Overall, what we’re trying to do is really just help our clients, and all stakeholders for that matter, ultimately do the good they’re intending to do, and achieve their goals.

And so, in terms of the specifics of your audience, Opportunity Zone funds are well-intended funds, intending to do good, and help communities in need. So, we’ve built solutions that really focus on doing the back-office administration, to help fund managers remain in compliance, help investors have transparency, and generally help the industry by reporting on the good these funds are doing, or making that information available, so that if all good things come together, this program will continue to be extended forever.

Jimmy: Oh, well, that’s great, Reid. And I’m hopeful that the program does get extended forever. It’s really important work, what you are doing and what the funds are doing, to try to report on the type of impact that they’re having, so that we can prove to the legislators and other stakeholders in the program that it’s working, not just according to the letter of the law, but also to the spirit of the legislation, the spirit of the law as well. So, let’s shift gears now, talk about ESG investing, impact investing. ESG has been in the news a lot lately, and those three letters, frankly, they seem to have become poisoned in recent years. A really politically divisive term, getting pulled in either direction by both sides of the aisle.

But impact investing, that term and that concept, I think it’s actually a topic that sincerely resonates with most investors, particularly with a lot of investors in my audience, Opportunity Zone investors, are attracted to Opportunity Zones for the tax benefits, sure. But, hey, the chance to make a difference in the world, the chance to socially impact a lot of these communities that have been left behind traditionally by private investment, I mean, there’s something to that as well. And I think that’s the case with a lot of the funds on your platforms and a lot of the investors in the funds on your platform. But let’s get after that for a second. Why do so many people conflate impact investing with ESG, and what is the primary difference between those two terms?

Reid: Yeah, great question. And when we talk about the survey, we’ve learned some interesting things in this area. You’re 100% right. ESG has become sort of a bad word. It’s a political hot potato. But at its core, I think it’s really intended about doing good. So, I don’t think investors necessarily argue with that concept of doing some good, but the ESG itself has become a bad thing. And I think the difference is, really, at the end of the day, ESG is more about inputs and metrics and regulatory reporting than it is about what the effect of those investments or inputs are. Whereas impact investing has really always been about the outcomes. We’re investing to cause change or to do good, so we’re gonna measure the good that we’ve done. We’re not measuring necessarily just, did I do the right things on the front end? We’re more interested in the outcomes.

And I think there could be a benefit to trying to define these things, so that at least we’re all talking the same language. Because you’re right, impact investing, and I think it was even on some of the podcasts and different things that I’ve done, people will complain that, “You know, don’t talk to me about that woke stuff.” But the reality is, what impact investing is, the vast majority of people are very interested in, and all about. It’s the ESG rules and regulations part of it that gets in the way, I think.

Jimmy: Yeah. And frankly, I think there’s some bad guys in the ESG world as well. I don’t think it’s the investors themselves. I think it’s oftentimes, when ESG is dictated from the higher-ups, our betters, the top down, the large corporations, our politically divisive politicians… Standard and Poor’s, I think about a year ago, removing Tesla from their ESG index because Elon Musk may have said the wrong thing about the wrong person at some point in time was just ridiculous, I think. I mean, that just is S&P making some sort of short-term political point. But whether you’re against ESG or you’re for it, that sort of politicization is really something that no one’s a fan of.

And I think absolutely, you’re right there, Reid. It’s a political hot potato. But at its core, impact investing, bringing it back now, I actually think it is super important, especially when it’s driven from the bottom up, from the investors, and it trickles up to the asset managers, to the funds, and to the locations where capital actually gets deployed. I think it’s a super important topic to get a better handle on. And so, that’s why I’m really interested in learning more about the results of your survey.

So, let’s break this into two parts now. First of all, I want you to tell us who took part in the survey and what questions were asked. And then, in part two, I’ll ask you what some of the results were. But first of all, just, very basically, who participated in the survey, and what sorts of questions did you ask those people?

Reid: Yeah. This is the second year we’ve done it. And thank you to you for your help with this, and promoting it. So, we had good responsiveness this year. We had almost 300 respondents, which the experts tell me makes this statistically valid. What we did that’s unique this year versus last was we sought some responses from folks in Europe, as well as some from folks in the United States, which gives us a good perspective. And we were talking about impact investing, or ESG for that matter. You know, the European market is generally known to be further along in terms of its regulatory structures. And so, there’s some interesting learnings that can come out of that. The responses themselves came, I would say, mostly from folks who are making investment decisions, be it investors themselves or investment advisors. But we also had a good representation of fund managers in there as well. So, sort of from both sides.

Jimmy: Good. And what questions were asked of the respondents?

Reid: So, a wide range of questions. But just picking on interesting things that we’ve been talking about, you know, you mentioned ESG and impact investing, and what are the differences. Well, it turns out that most people use those words interchangeably. People generally feel very favorable, as you said, about impact investing. And so, that’s a fascinating learning just in itself, that the terms are interchangeable. And so, maybe, for our industries, we should be talking more about value-based investing and outcomes than we should be about ESG compliance.

But we ask them questions about basic definitional things. We ask them questions about frameworks and methodologies. Because as you know, there’s probably 600 frameworks out there…

Jimmy: At least, right?

Reid: Yeah. Of ways that you can report these things. We asked them about their preferences in terms of what they care about, what they like to invest in. And some of that stuff’s very interesting when you start parsing it by age. You know, what’s the age of the investor? And how do they view things versus older investors? So, a wide, wide smattering. And then of course, ask them again some questions specifically about Opportunity Zones, because we like to continue to show sort of year-over-year progress as to what’s going on in that sector.

Jimmy: Okay. Good. And what were some of the key takeaways from the reports then? Let’s dive into the report a little bit.

Reid: Yeah. Well, the first one, I think, you know, we already discussed, that ESG and impact are blending together in terms of terminology. And it would be valuable to separate those two things out, if nothing else, to disconnect from the politicization of this. Since Opportunity Zones was created, it’s amazed me how the media, and many speakers in government, for that matter, seem to wanna tear it down. “It’s a tax incentive for the rich. It’s only for the rich. The tax money could be spent better elsewhere,” and so on. But the reality is, all the early indicators for what’s going on in Opportunity Zones are indicative of this program making a difference in the communities it’s intended to make a difference in. So, let’s not kill it. And if it can get tied to ESG, that’s another battle we’re gonna have to overcome. So, I think that was important learning for all of us in the industry who have some ability to make public comments or maybe influence thought. So, that was one.

Another one you sort of touched on was values. Individual investors… So, we asked individual investors, okay, what do they think is most important, you know? Clean water, or low carbon, clean air, or helping the homeless? I mean, there was a whole list of these kinds of things. And what we found out is that those passions are all over the place. It’s not one thing versus another. So, investors are aligning what they’re motivated with with their passion, or their values. And it’s okay that investors care more about climate, some care more about homelessness, or maybe they just want them in different, to focus on one versus the other.

So, what we learned was that the articulation of what the mission is of the fund, and what the value you’re trying to align with or the outcome is, is very important to the investors in making their investment decision. So, it’s not good enough just to say, “Hey, this is an ESG fund,” or “this is an impact fund.” It’s important to articulate what the mission of the fund is, and what it does. And so, that drives a preference out of investors towards maybe asset classes that are similar, or aligned, as opposed to blind pool funds that can just go anywhere. That was another big learning which we did at the same time.

I can go on. In terms of frameworks. There’s a lot of confusion out there about what the right frameworks are. Like I said, there’s 600 of them. And at the end of the day, I don’t think that’s really important, the framework so much, which one you choose. And so, our approach has been to support a whole wide variety of different frameworks, to report in a way that makes sense for the client. At the end of the day, the investors care about outcomes, and so, how can you show those outcomes? Is it a number of jobs? Is it a number of housing units? Is it changes in the education level?

So, at the end of the day, I think it’s about, well, what was the scenario in that community before you went in there? And then you start, what do you think the potential outcome from this investment could be? And then track it over time. That’s the kind of solution where we’ve got a lot of traction in the marketplace, as opposed to saying, “My score on framework X, Y, Z is a 2 out of 100 or 90 out of 100.” People don’t seem to care.

Jimmy: Yeah. Those are some incredible learnings. I’m turning my attention to the report right now, and just kind of looking at some of the big takeaways that you have here, starting on, what is this? Page five. As you mentioned, 90% of your respondents view impact investing positively, and 65%, about two-thirds, of the U.S. respondents, at least, believe that impact investing and ESG investing are the same, so we’ve kind of covered those all right, but talk to me more about the blind pool fund versus single-asset funds. It seems like, according to your report, 70% of impact investors prefer that single-asset fund to a blind pool fund. Why do you think that is?

Reid: Yeah. And I think it’s really single-asset type, or single-asset class, as opposed to single-asset. And I think that’s because each individual investor has their own set of values, and cares about certain things. And so, if you’re in, say, a fund that’s multifamily, focused on affordable housing, well…

Jimmy: And it could be, just to interrupt, it could be a multi-asset fund, but it’s within the one asset class of multifamily, just to clarify your point from before.

Reid: Yeah, that’s right. Thank you for that, because that’s really important, because we also have diversity and different geographies that can go on in your investment decisions, but at the end of the day, it’s focused on solving a housing problem. And that’s what some people are extremely passionate about. Others might have green buildings in their portfolio, and they’re building office, or mixed-use, or that kind of thing. And so, it’s about clean air. Others are clean energy kind of funds, where they might have solar farms, or wind farms, or some combination.

We see all of these things going on within Opportunity Zones, certainly. And that aligns with investors. An investor may have multiple passions, I’m not saying they don’t, but fund managers might wanna consider breaking that out to align, you know, I have a fund for this mission, another one for that mission. It might be a strategy, based on the data that we’re seeing here, that investors care about and they can quickly align to.

Jimmy: Now, that brings me to your next finding here in the key takeaways section. We’ll just go through a few more of these. I don’t wanna go through the entire report.

Reid: Yeah. No, of course.

Jimmy: It’s a big report. We’ll tell you more about how you can get your hands on it toward the end of the episode today. But the next section here deals with the ease of finding impact investing reporting, and less than half your respondents claim that it was easy to find such types of reporting. This gets back to the different types of frameworks. Can you comment on that? Why is it so difficult to report on these types of investments, and do you think that might change over time?

Reid: Yeah. There’s no standard, is where it sort of starts. So, everybody’s reporting is gonna be a little bit different. And I think you touched on this early in the program, where you talked about bad actors in the ESG space, right? People can twist their scoring or their frameworks or their reporting to make a bad story sound better, right? And that’s, you know, “greenwashing” is the term we hear in the ESG space, that’s going on. So, there’s lots of effort to try to establish standards in the space, and there’s progress being made. If you go all the way to the top at the UN level, there’s principles for responsible development, the sustainable development goals, and there’s these kinds of things that people can align to. But when it gets right down to, are you a low, medium, high, or a 10 out of 10, or a 90 out of 100, these are all over the place, and there is no standard that’s catching on.

Some frameworks are better at evaluating real estate. Others are better at evaluating energy, and so on, because there’s different metrics that need to be reported. So, I think, when it’s all said and done, the whole framework thing just creates a lot of confusion. So, what’s the mission of the fund, and how are we doing in said mission? And right now, there’s no one-size-fits-all in terms of frameworks.

Jimmy: Well, it’s values-based. It comes down to the values of the investor, right? I could probably put together an oil and gas, or a fossil fuels fund. Let’s say I’ve got, I don’t know, just, let’s call it a fossil fuels fund, for lack of a better term, “Atkinson’s Fossil Fuels Fund.” I’m sure that would score a zero out of 100 on climate-focused ESG reporting, but on delivering energy at low cost to low-income communities, or to low-income nations, I might score a 100 out of 100 on that type of reporting framework. But it all depends on the values of the investor at the end of the day, right?

Reid: That’s right. That’s exactly right. And that’s how I think, you know, one of the takeaways from this survey is, if you’re a fund manager, maybe you wanna start positioning and thinking about how you communicate the value of the fund, the purpose of the fund, with that eye towards how the investor views values. The other part of this question on the survey talked about how easy it is to provide this reporting. And this is something that, you know, with the OZ Act for increased transparency that Senator Scott’s been working on, and I know you’ve had Shay on your program several times to talk about this also…

Jimmy: Yeah.

Reid: …you know, my view on that is it doesn’t have to be that hard to do this kind of reporting. Some people make it sound like it’s really hard, but there’s a lot of information about impact that you can derive from the accounting that you’re doing on the fund, which, all funds, of any quality, are certainly doing financial accounting and financial reporting. And so, based on that alone, there’s a surprising amount of impact-related data that can be calculated. How many jobs are created, what tax revenues are created in the area, labor income generated, what happens to wages for people in the area?

A lot of interesting stuff that can be derived from that, that’s not hard, it’s just math, that can be done. So, I think sometimes people automatically assume these things have to be hard. They can be, but they don’t have to be always.

Jimmy: Yeah. I mean, oftentimes, like you mentioned, it can be derived from reports that the fund may already be generating.

Reid: That’s right.

Jimmy: Well, what are some of the big takeaways now for, if I’m a fund manager, maybe I’m a Qualified Opportunity Fund manager, or some other type of private equity fund or alternative investment fund manager, what are a couple of the big takeaways that you think I should keep in mind as a result of this survey report?

Reid: Yeah. Well, I think that we’ve talked about it a lot. Opportunity Zone funds continue to be of tremendous interest to investors. And along those lines, the mission of what that Opportunity Zone fund is is becoming increasingly important. If we go back two years, nobody was talking about what the mission of the fund… I shouldn’t say nobody. Very few fund managers out there were talking about that. It was all about the tax incentive. A year ago, a good portion of folks were starting to shift to more of an impact-first approach, as they’re talking about their Opportunity Zone funds, because, two reasons. One, I think it helps the program overall with the likelihood of being renewed and extended. But secondly, it helps them raise capital, as more and more investors start to care about it.

This year, that trend has just continued. So, the momentum continues to move towards, it’s a good idea to be talking about the values-based parts of what your fund is doing when you’re out raising capital, even if it’s not an impact fund, even though that’s not the mission, I think that’s okay. If the mission is, “Hey, we just wanna return as high a yield as we possibly can,” nothing wrong with that. But at the same time, if there’s some sort of values-based hook in there, I think maybe we should start talking about that.

Jimmy: Yeah. Maybe even lead with that, as it seems that those types of impact-driven marketing messages are resonating more and more with younger investors. And, fact of the matter is, a lot of the wealth that is tied up in this country is in the hands of some rather old people who are going to be bequeathing that wealth to the younger generations. And so, I think we’re gonna see a huge transfer of wealth from old to young over the next 10 to 20 years, maybe sooner than that, and impact investing will continue to become more and more important because of that huge wealth transfer.

Hey, Reid, it’s been great getting your knowledge on impact investing today, and the Opportunity Zones industry. I wanted to zoom out here as we kind of wind down our time today. JTC Group, as I mentioned, is a global leader in the private equity industry, the Opportunity Zones industry, and the alternative investments industry. With that in mind, Reid, what are some of the more powerful trends that you think will play out over the next few years across the private equity industry and the impact investing space?

Reid: Well, in particular, I think we’ve been sort of dancing around this topic, right? You talked about this wealth transfer at the end of the day. I think, in a nutshell, impact investing will just be investing. Now, we won’t be talking about impact investing versus other investing. That’s what investing will be. It’s a consideration that investors are gonna make when they’re choosing who to invest with and what to invest in. And I think that’s the trend that we’re seeing.

Jimmy: Well, I think you’re right, and I look forward to seeing how it unfolds over the next decade or so here. Hey, Reid, it’s been great speaking with you. Thanks so much again for sharing your insights. Before we hop off, where can our audience of high-net-worth investors and advisors go to learn more about you and JTC Americas, and, crucially, how can they download your impact investing report?

Reid: Thanks, Jimmy. So, in terms of the website, it’s, or, to get more information on our company as a whole, even if you’re interested in learning more about me, although I think the company’s much more interesting. In terms of the report and the survey, we’re gonna be hosting a webinar later this month, where we will go through the details of this survey, and take live questions from participants. All folks who have registered for that event will get a copy of the report, or at least a link as to where they can go get it. So, stay tuned for more, and I’m sure you’ll make that information available to your audience as well.

Jimmy: I will, Reid. Yeah. Thank you for reminding me. I’m definitely gonna have that link to your upcoming webinar registration on the show notes for this podcast, or it may be in the description, right below where you’re watching it right now if you’re watching us on YouTube. And that reminds me, for our listeners and viewers, as always, I will have show notes available for today’s episode. You can find them at And I’ll make sure I have links to all of the resources that Reid and I discussed on today’s show. And please also be sure to subscribe to us on YouTube or your favorite podcast listening platform to always get the latest episodes. Reid, thanks again for joining us today. It’s been a pleasure.

Reid: Always a pleasure, Jimmy. Thanks for having me on.