Giving Compass' Take:

• Tracy Palandjian and Paul Brest urge philanthropists to think beyond the current pandemic and use this opportunity to create a lasting impact through tools like pay-for-success programs. 

• Is this an appropriate time for you to take action through a pay-for-success program? 

• Read about when pay-for-success makes sense.

Federal, state, and local governments are spending trillions of dollars to combat the new coronavirus pandemic. But as government agencies and officials work urgently to respond to this crisis of unprecedented scope, they also have an extraordinary opportunity to ensure that programs born of an emergency can achieve measurable outcomes that strengthen our social infrastructure for decades to come.

This is true for philanthropy and impact investors, too. Many donors and foundations are reacting generously to provide aid to those most affected by this crisis. Some impact investors, for example, are providing zero percent bridge loans to nonprofits, and some corporate philanthropies are supporting small businesses. These funders have an opportunity to think beyond immediate challenges and give policymakers the support needed to achieve long-term impact.

Following Machiavelli’s oft-repeated advice—never to waste the opportunity offered by a crisis—we urge leaders from across sectors to consider opportunities to transform short-term emergency efforts into sustainable systems change.

Pay for success (PFS) is one promising tool for doing this. In PFS projects, instead of simply paying for services (which sometimes works, but often does not), government agrees to pay for measurable impact. But many nonprofits that provide shelter, medical care, job training, and other services can’t afford the time-lag between delivering services and demonstrating outcomes, or the risk of underachieving. That’s where philanthropists and impact investors come in. In a social impact bond (SIB), an important adjunct to PFS, philanthropists and impact investors provide service-delivery organizations with working capital. Government agrees to release success payments to them only to the extent that agreed-upon outcomes are achieved.

Read the full article about pay for success programs by Tracy Palandjian and Paul Brest at Stanford Social Innovation Review.