Managing Investors' risk in pay for success projects

Abstract

p a y f o r s u c c e s s i n i t i a t i v e why governments and investors choose pay for success perspectives on motivations and risks kelly walsh, brian bieretz, kimberly walker, and mayookha mitra-majumdar november 2017 motivations matter, and understanding them is critical to ensuring that people work together when things get tough. — corporate pfs investor pay for success (pfs) has merits that make it appealing to many stakeholders: it can save governments money, shift the risk of ineffective programs to third-party funders, provide multiyear funding for service providers, and generate a modest return for investors. but these benefits are paired with significant challenges, such as long planning periods and investor returns that may not be commensurate with the risk. given these considerations, it is fair to ask, “why does anyone want to do this?” this brief presents insights on the motivations and perceptions of risk from several pfs investors and government stakeholders and concludes with recommendations on how pfs project champions can leverage partner motivations to help move projects forward. why motivations matter although pfs projects are complex collaborations with a wide range of actors, interest from two key partners—the end payor (usually a government) and investors (philanthropies and corporations)— determines whether a project goes forward and is perhaps the most crucial factor in sustaining demand for this model. both for-profit and nonprofit investors …

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