Our work developing Pay for Success (PFS) projects and social impact bond (SIB) mobilizes capital to drive social progress by guiding capital to programs and interventions that work. We structure outcomes-based projects that generate financial and social value. Social Finance projects increase funding available to effective service providers, helping to better serve those most in need by linking performance to successful outcomes.
Develop Projects and Mobilize Capital
What does an intermediary do?
As the intermediary in a PFS project, Social Finance acts as a coordinator and project manager for government, service providers and impact investors, driving the design, negotiation, and financial structure of the project. Social Finance also raises the necessary capital from multiple sources for the PFS project, and is responsible for ongoing investor relations and active performance management services. We believe that when we stay involved for the entire life of the project, PFS projects are most likely to succeed.
Social Finance was one of the first organizations in the U.S. dedicated to providing PFS intermediary services. We have successfully designed and implemented all phases of PFS projects, including program design, measurement and evaluation, economic and financial modeling, contract development and ongoing financial and performance management. Our core team capabilities include strategic oversight, legal expertise, government experience, data analysis, financial modeling, and capital coordination.
PFS development is a collaborative process that involves different activities across multiple streams of work. Because the model unites uncommon partners — government, philanthropy, nonprofits and impact investors — around a common goal, we are skilled at facilitating multi-sector engagements. At Social Finance, we sit in the middle of all these stakeholders to ensure that we develop projects that deliver social and financial impact.
To develop a PFS project and mobilize the capital to support it, the social investment team works through the design phase, development phase, contracting phase, and launch phase across four streams of work: program design, data and evaluation, economics and finance and legal.
PFS Program Design
The program design process starts with government or another outcomes payor identifying a social challenge they hope to solve. Social Finance works to identify an effective intervention, define the community in need, determine the geography where that target population is most prevalent, establish how many clients the program will serve, and choose outcome metrics. We also work closely with the service provider to define an operational growth strategy that will enable them to scale the social program while maintaining successful results.
With our government partners, we develop an evaluation plan and select an evaluator, who details the measurement and evaluation methodology — the way the project will be measured to determine if outcomes have been achieved.
Another key stream of work focuses on project economics. We work with our partners to identify outcome metrics and establish the value, or the price, of those outcomes, based on administrative data from government, evidence from the service provider, and negotiations between the project partners. This process involves understanding short-term budgetary savings and longer-term social value, as identifying where benefits and savings accrue. We work together to determine how the funding will flow from the funders to the service provider, the timing of that funding, and the trigger for repayment if outcomes are achieved.
PFS Financing and Legal
Finance and legal work streams occur throughout the project. Social Finance manages the nuances of PFS contracting, in which government pays for outcomes, not services. Once the PFS contract is executed, our team draws on its capital market expertise to structure the financing and coordinate the capital raise for the project. We work with premier community development funders and investment banks in the U.S. to mobilize capital from impact investors, philanthropies, and other institutions.
By working closely with the different parties at the table, and because of our committed focus on PFS, Social Finance takes PFS projects from concept to launch to completion. Once service delivery begins, our Active Performance Management team makes sure the project stays on track.
If you are interested in learning more about partnering with Social Finance on Social Investment work, contact Vice President Nirav Shah.