Pay for Success and Performance-Based Contracting

Pay for Success transactions (also called Social Impact Bonds) and other performance-based contracts are a subset of impact investment. A Pay for Success transaction involves a third party that agrees to pay for services on the basis of positive social outcomes.

In a Pay for Success transaction, the service provider has a need for upfront capital to sustain operations prior to being paid for outcomes. Impact investors finance this provider to deliver high quality services that result in positive social outcomes. The government (or occasionally another entity paying for the services) repays investors only when these outcomes are achieved.

Pay for Success transactions therefore differ from standard impact investments in several important ways:

  1. Investors’ repayment is dependent on the achievement of outcomes.
  2. The dependence on outcomes for financial repayment makes Pay for Success investments riskier than the average impact investment, particularly because the investors do not usually have recourse to provider balance sheets or other assets as collateral. But most Pay for Success contracts have contract reviews clauses and performance thresholds that mitigate the risk to investors.
  3. The inclusion of government or another entity paying for outcomes strengthens cross-sector collaboration.


There are a number of reasons why governments are interested in paying for outcomes, and we are happy to discuss the potential fit of Pay for Success with supportive housing in your community. Contact us at



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