Bank of America and Social Finance Inc. Study Reveals Potential to Expand Services for Military Veterans Through Innovative Pay for Success Programs

February 18, 2015

New Research Identifies Opportunities to Increase Funding and Collaboration to Scale Effective Services That Measurably Improve the Lives of Veterans and Their Families

NEW YORK – Bank of America today announced the results of a first-of-its-kind study exploring opportunities to use pay-for-success (PFS) programs and other innovative forms of social financing and impact investing to expand social service programs for U.S. military veterans. The study was conducted in partnership with Social Finance, a nonprofit intermediary organization dedicated to mobilizing investment capital to drive social progress through innovative funding models, with the findings now published in a new report, “Improving Outcomes for Veterans: Assessing Pay for Success Opportunities.”

Findings from the study were shared today with senior government and military officials, corporate leaders and veteran-focused service organizations at the George W. Bush Institute’s Military Service Initiative Summit in Dallas. During the event, Bank of America also shared plans to collaborate with the Wounded Warrior Project and Social Finance to further examine the potential for a PFS program to expand workforce development services for veterans, based on findings from the study. These services are vitally important as veterans reenter civilian life and seek employment.

“Thanks to this research, we’ve identified several areas where innovative forms of social finance could help expand services greatly needed by our growing military veteran population,” said Andy Sieg, head of Global Wealth and Retirement Solutions for Bank of America Merrill Lynch. “Providing investors the opportunity to direct capital to services proven to produce positive outcomes gives them the chance to invest in accordance with their values and improve the lives of those who have protected ours.”

Potential to scale veterans services for greater impact
With more than 22 million veterans living in the U.S. today, and as many as 300,000 additional service members expected to leave the military annually over the next five years, services for these men and women will increasingly require additional resources. For this reason, Bank of America engaged Social Finance to help assess the viability of using PFS programs to scale the operations of organizations proven to be effective but that lack the funding needed to have an even greater impact. The availability of sufficient metrics to establish the effectiveness of these services is what makes a measurable PFS program possible.

“There are many effective organizations providing veteran services across the nation, however most need greater and more reliable funding to grow their programs,” said Tracy Palandjian, CEO and co-founder of Social Finance Inc. “Our research has helped identify interventions and programs ready to scale to help more veterans stay healthy, be productive and enrich their lives. At the same time, we hope that these insights will serve as a catalyst to help drive government resources toward programs that measurably improve the lives of veterans and their families.”

The study reflects input from more than 80 interviews with leaders across multiple sectors including military, finance, government, academia, nonprofits and philanthropy – and the screening of more than 70 veteran-serving organizations. Through this study, Social Finance analyzed five key factors for potential PFS programs, including specific veteran populations, evidence-based programs, social service providers, economics and metrics, and outcomes for payors. Among a number of opportunities identified through this research, three have been highlighted where PFS programs could play a role to scale much-needed services:

  • Employment and wellness: Veterans aged 18 to 34 experience unemployment rates higher than those of civilians in the same age group. Findings from the report show potential for a PFS project to support organizations that provides supported employment with mental health services to veterans who are unemployed and have a mental-health diagnosis, such as depression or post-traumatic stress. According to the report, these services increase employment and earning potential, while decreasing reliance on health care services and generating greater tax revenues from increased lifetime earnings.
  • Chronic disease management: The fastest-growing segment of health care spending for veterans comes from those with one or more chronic diseases, including diabetes, chronic obstructive pulmonary disease, heart conditions, renal failure, dementia, and stroke. The report notes that a PFS demonstration project may provide home-based transitional care to prevent hospital re-admissions for pre-9/11 veterans over the age of 65 who are diagnosed with chronic disease. By improving health outcomes and helping veterans become more self-sufficient, according to this report, savings could be achieved by reducing re-hospitalizations and hospital stays.
  • Housing support for female veterans: Female veterans are overrepresented within the homeless population, with their numbers increasing even as overall veteran homelessness is decreasing. Current estimates of homeless female veterans range from 4,000 to 11,000. The report highlights that a philanthropically-funded initiative may reduce or eradicate homelessness for post-9/11 female veterans not currently served by the U.S. Department of Veterans Affairs. According to the report, such an initiative could help reduce the reliance of female veterans on county-level services, and improve the health and educational outcomes for children of female veterans.

“This study helps us understand some of the most important needs of our nation’s veterans and the potential to develop impact investment opportunities that could benefit them, the public sector, private investors and service organizations alike,” said Lewis Runnion, director of military affairs for Bank of America Merrill Lynch.

Click here to download “Improving Outcomes for Veterans: Assessing Pay for Success Opportunities” and read about other promising initiatives and recommendations on steps that could be taken to make them PFS-ready.

Omidyar Network and The Pershing Square Foundation Grant Social Finance, Inc. $4.0 Million to Accelerate Growth of Pay-for-Success Financing

Flexible Funding Will Expand Opportunities and Drive Further Innovation of PFS Nationally

Boston, MA, December 4, 2014 — Social Finance announced today, at a White House Pay for Success Summit in Chicago, grant awards totaling $4.0 million from Omidyar Network and The Pershing Square Foundation to support its operations over the next three years. The flexible funds will be used to expand Social Finance’s transaction and advisory teams, as well as accelerate the flow of Pay-for-Success (PFS) financing (or Social Impact Bond) transactions in the United States. The grants represent funding renewals from Omidyar Network and The Pershing Square Foundation, which were founding supporters of Social Finance.

The funding comes as interest in PFS has increased dramatically across the nation. PFS financing is an innovative funding model that drives government resources toward social programs that prove effective at providing results to the people who need them most. The model enables federal and state governments to draw in greater resources to tackle social problems by tapping private investments for the up-front costs of the programs. PFS ensures that taxpayer dollars are being spent only on programs that actually work. As interest in these projects has accelerated, so too has demand for experts that can evaluate PFS feasibility for various interventions, structure transactions, and manage performance.

Social Finance’s CEO and Co-Founder, Tracy Palandjian, emphasized the value of this funding to the organization’s ability to support the growth of the PFS market. “The flexibility of this financial support is critical,” she stated. “It will allow us not only to strengthen our internal infrastructure but also to pursue high-quality projects, including those that might not otherwise get off the ground due to lack of funding. Our ability to work on high-impact projects in various geographies and issue areas will go a long way toward positioning PFS for long-term success and ultimately helping people in communities across the U.S. gain access to better services. We are grateful to our partners at Omidyar Network and The Pershing Square Foundation for their stewardship and guidance since our early years.”

With these grants, Social Finance will be able to expand its PFS feasibility and transaction development services to execute a greater number of high-quality projects as well as speed innovation by exploring new issue areas. Over the next 12-18 months alone, Social Finance expects to close five projects that are currently in development in Connecticut, Massachusetts, New York State, South Carolina, and Washington, DC. Its advisory team is now evaluating PFS opportunities to benefit veterans, first-time mothers, and the long-term unemployed as well as vulnerable communities in geographies from Tennessee to California and anticipates working with more stakeholders in the coming years.

A leading advocate of impact investing, Omidyar Network has supported PFS as a way to bring private capital to proven solutions. “PFS financing has the potential to connect the social sector with a vast pool of capital for the good of society. From chronic disease management to adult basic education, we believe that PFS can finance greater access to prevention and early intervention programs that can generate positive outcomes for our society. We are excited to continue our support of Social Finance as key leaders in this space” stated Amy Klement, Partner at Omidyar Network.
The Pershing Square Foundation has been a champion of the PFS approach since its introduction to the US in 2011. “Market-based models, such as PFS financing, have tremendous potential to solve longstanding social challenges because of their ability to align incentives among parties that don’t normally collaborate and bring sustainable funding to the table, and we are proud to support Social Finance’s pursuit of this approach,” stated Paul Bernstein, Chief Executive Officer of The Pershing Square Foundation.

Since its founding in 2011, Social Finance has collaborated with stakeholders throughout the United States to assess PFS feasibility for various interventions and develop projects in support of at-risk populations. Last year, it launched one of the first PFS financing projects in the US to improve employment and recidivism outcomes in New York State.

About Social Finance, Inc.
Social Finance, Inc. is a 501(c)(3) nonprofit organization that is dedicated to mobilizing investment capital to drive social progress. The organization focuses on structuring and managing impact investments that unlock capital to finance effective solutions to persistent social problems and drive an outcomes-focused social sector. The firm develops Social Impact Bonds, innovative multi-stakeholder partnerships, that help more people gain access to better services by scaling performance-driven social programs, creating taxpayer efficiencies, and generating financial returns for investors. For more information, please visit

About Omidyar Network
Omidyar Network is a philanthropic investment firm dedicated to harnessing the power of markets to create opportunity for people to improve their lives. Established in 2004 by eBay founder Pierre Omidyar and his wife Pam, the organization invests in and helps scale innovative organizations to catalyze economic and social change. Omidyar Network has committed more than $735 million to for-profit companies and non-profit organizations that foster economic advancement and encourage individual participation across multiple initiatives, including Consumer Internet & Mobile, Education, Financial Inclusion, Government Transparency, and Property Rights. To learn more, visit, and follow on Twitter @omidyarnetwork #PositiveReturns

About The Pershing Square Foundation
The Pershing Square Foundation is a private family foundation, based in New York, founded in December 2006 by Karen and Bill Ackman. The Foundation has committed $250 million in grants and social investments to support exceptional leaders and innovative organizations that tackle important social issues and deliver scalable and sustainable impact. Bill is the CEO and portfolio manager of Pershing Square Capital Management, L.P. For more information visit:

Media Contact

Tracy Barba
Director of Communications, Social Finance


What We’re Reading: Nicholas Kristof and Sheryl WuDunn on the Power of Early Intervention

In a  New York Times Sunday Review article on September 14, Nicholas Kristof and Sheryl WuDunn explore “the way to beat poverty” – through good parenting and early intervention, “ideally in the first year or two of life or even before a child is born.” They highlight the work of Nurse-Family Partnership (NFP), which “dispatches nurses to visit low-income, disadvantaged families and offer counseling on child-rearing.”

As Kristof and WuDunn point out, Nurse Family Partnership’s mission is grounded in the power of early intervention. By working with expectant mothers through the child’s second birthday, NFP prevents problems from emerging and thus improves long-term life outcomes for mother and baby. Rigorous studies repeatedly show NFP’s ability to deliver measurable results, such as more healthy, full-term births, and fewer developmental delays. At the same time, the program generates a positive return on investment by eliminating the need for costly remediation services, such as NICU and special education expenses.

So it is indeed “infuriating” (as expressed by the authors) that NFP is only able to serve 2-3% of first-time mothers on Medicaid. Like most nonprofit service providers, NFP has traditionally relied on government and philanthropy to fund its work, but these sources are increasingly inadequate in an era of scarce resources and soaring need. Emerging models to tap the capital markets have great potential to complement these traditional funding sources.

This is where Social Impact Bonds (SIBs) come in. SIBs are public-private partnerships that mobilize investment capital to scale up the work of evidence-based nonprofits like NFP. SIB financing offers the potential to unlock new sources of capital, drive long term, flexible resources to what works, and allow service providers to focus on their core mission rather than fundraising. SIBs are being actively explored in red and blue states; at the federal level, bipartisan bills in support of SIBs were recently introduced in both the House and Senate.

These diverse partnerships are challenging to structure and maintain, so Social Finance is a nonprofit intermediary that helps to bring stakeholders together, and design and manage these projects. We are honored to be partnering with NFP to develop SIBs in South Carolina, New York and California that will fund NFP’s expanded reach. SIBs cannot solve all our social challenges, but they can play an important role in enabling high-performing organizations like NFP to make lives better for the youngest and most vulnerable of Americans.

Entry by Jane Hughes, Director of Knowledge Management 

An Intern’s Perspective: My Summer at Social Finance

This summer, I had the privilege of serving as the first [Harvard University Institute of Politics] Director’s Intern at Social Finance (SF), a Boston-based nonprofit organization dedicated to mobilizing investment capital to drive social progress.

Central to SF’s work is an innovative financing tool called the Social Impact Bond (SIB), a public-private-nonprofit partnership that has the potential to scale evidence-based social interventions, create taxpayer efficiencies, and generate financial returns for investors. SF structures and manages SIB transactions, and also helps governments and service providers develop the capacity to become stakeholders in these initiatives.

Today, there are four SIBs operating in the United States—directing $50 million in capital to the social sector—and over two dozen additional states and counties actively pursuing SIBs in their respective jurisdictions. These projects are aimed at addressing a diverse array of issues in areas such as health, education, homelessness, criminal justice, and workforce development.

The work I was assigned at SF was engaging and informative, providing me the opportunity to gain real insight into the emerging field of Pay for Success and Social Innovation Financing. In my role as a communications intern, I updated SF’s social networking outlets, marketing materials, and website on a regular basis and took on ad hoc responsibilities as they materialized. The most challenging and rewarding projects I worked on this summer involved constructing a comprehensive database of SIBs in operation and development around the world and writing a post for the SF blog that was later picked up and circulated by the global daily SIB Newsletter.

When I first walked into the office, I was surprised (as most visitors are) by the conspicuous absence of cubicles or partitions. Everyone—from Associates to the Vice President, Managing Director, and CEO— sits side by side at adjoining desks. As I bounced between temporarily available seats over the course of the summer, developing a deeper understanding of different projects and closer relationships with my fellow coworkers, I quickly realized the value of the open floor plan. This unique layout facilitates a collaborative work environment and speaks to the firm’s people-centric culture.

Throughout the summer, I received constant guidance and support from my supervisors, who were just as willing to answer questions in my seventh week as they had been on my first day. The team members, universally inspiring in their knowledge and passion, were always open to sharing their experiences and offering advice. Bonding occasions ranging from impromptu coffee breaks to newly instituted “Food Truck Fridays” were highlights of the internship.

I am incredibly grateful to the SF staff for taking a genuine interest in my development and making me feel like part of the team. I would also like to thank the IOP for coordinating what was truly a fantastic internship experience.

This summer marked a particularly exciting period of growth for this nascent sector with the introduction of bipartisan federal Pay for Success legislation in Congress (the Social Impact Bond Act in the House of Representatives and the Pay-For-Performance Act in the Senate), the publication of the United States National Advisory Board on Impact Investing’s recommendations for supercharging the industry, and the launch of the Social Innovation Fund’s $11.2 million Pay for Success grants competition.

Though I will no longer be held accountable for remaining informed of such advances in the field, I fully anticipate following the evolution of this exciting space to a mature and established industry trusted to tackle society’s most complex challenges.

Entry by Maddie Sewani, Harvard University ’16

This post was also published by Harvard University Institute of Politics here.

First Official Results Demonstrate Positive Outcomes at Peterborough

Today, Social Finance UK released the first official results on the Peterborough Social Impact Bond (SIB)—the groundbreaking transaction that inspired numerous projects around the world.  An independent evaluator found that the SIB-financed program, One Service, reduced reoffending among the first cohort of 1,000 ex-prisoners by 8.4 percent compared to the national experience.  If this trend continues, investors in the transaction will recoup their principal and earn a positive return when the project concludes in 2016, as this reduction exceeds the performance threshold of 7.5 percent.[1]

Beyond remaining on track to deliver social and financial returns to investors, the project at Peterborough is also demonstrating some of the core benefits of SIBs.  The project catalyzed a policy conversation throughout the United Kingdom about how to better rehabilitate short-term offenders, and the Ministry of Justice recently announced a nationwide program to deliver services to this population.  This underscores the potential for SIBs to spur government reform.

Additionally, the program illustrates substantial operational improvement over time, reflecting the power of data-informed project management and flexibility that are core to the SIB model.  Engagement and uptake of services in prison increased from 74 to 86 percent since services began, and from 37 to 71 percent post-release as One Service adjusted its operations.

As the world’s first SIB, Peterborough has become an iconic program, and in that context we are pleased and encouraged by these results – both as a sign of progress for the Peterborough project itself, and for the evolution of the entire sector.  They indicate that active performance management is critical, that investors are indeed taking on risks, and that the deal was well-structured to benefit all stakeholders in a fair and reasonable manner.  As clear-eyed practitioners in the field, we are well aware of the challenges inherent in launching a new financial instrument, and are mindful of the need for continual learning.  In that sense, early data points like these are valuable to all of us seeking to advance and build a strong field.

Perhaps most important, however, today’s announcement reminds us that the real value of SIBs lies in their ability to improve lives for vulnerable and underserved populations; the financial instrument is a means to an end.  As rigorous evaluation now reveals that the Peterborough project is delivering a meaningful improvement in life outcomes for formerly incarcerated individuals, which translates into fewer crimes, fewer families divided by the return of a father or son to prison, and increased numbers of ex-offenders who find gainful employment. This is the real bottom line, conveying the promise and power of the SIB model.

[1] There was a provision for early outcome payments in August 2014 had the program outperformed and delivered a 10 percent reduction in recidivism for the first cohort.  Investors will not be receiving these early payments, but are well on track to receive outcome payments for both cohorts as scheduled in 2016.

Entry by Jane Hughes, Director of Knowledge Management 

Guest Blog from SFUK Director of Peterborough Project: The One Service Delivers Results for Peterborough Prisoners

Finally we can answer the question about how things are going in Peterborough. All the indicators so far had been positive but it’s great to hear that reconvictions are down by over 8%. If we keep up our hard work, our investors look likely to make a return in 2016.

This project oozes innovation and it has been so exciting to be part of it. The team of staff and volunteers are incredible, as are our local partners, so it is no surprise to find that we have had a positive impact. You often hear people talk about multi agency working but I’ve never experienced it quite like this before. The fact that we had seven years, a flexible budget and one outcome, to reduce crime, resonates with agencies across the spectrum and their buy-in has been fantastic.

It’s been hard to get an accurate sense of performance up until now as the control group hadn’t been created. We do know that clients and stakeholders have been reporting that crime is down and people are changing habits of a lifetime but it is so good to see it in black and white. (It’s official!)

Our clients face multiple barriers and often have entrenched behaviour patterns so this journey hasn’t been an easy one. I am so proud of the way they have embraced the opportunities and made efforts to change their lives. It has been really exciting to see them open up and engage with the service. Some take time to build trust, and progress has been slow and steady over the last three years. This reinforces my view that projects like this need to be long term, so we can establish meaningful relationships and integrate fully into the local landscape. It’s been really hard work and at times immensely frustrating but it’s great to know that it is working.

The One Service was set up to be a seven year project and that is what we all signed up for, so it could evolve and improve further over time. It is a big personal disappointment that it was brought to a close two years early and it is a decision that clients and stakeholders are also struggling to accept. The team will however do our best for the remainder of Cohort 2 and use the learning to date to continue to improve. Thanks for everyone’s support!!

Entry by Janette Powell, Social Finance UK Director of the One Service and the Peterborough Social Impact Bond

DC Social Impact Bond Leadership Part of National Impact Investing Agenda


Today, Social Finance US announced an innovative new impact investment initiative to address the challenge of high teen pregnancy rates in the District of Columbia. This initiative is one of more than twenty new commitments made public at yesterday’s White House Roundtable launch event for the U.S. National Advisory Board report, Private Capital, Public Good: How Smart Federal Policy Can Galvanize Impact Investing – and Why It’s Urgent. The study was produced by the U.S. National Advisory Board (NAB) on Impact Investing, which is co-chaired by Matt Bannick, Managing Partner of Omidyar Network, and Tracy Palandjian, Co-Founder and CEO of Social Finance US.

The NAB’s work grew out of an international effort at the G-7 level to explore the role that impact investing can play in accelerating economic growth and addressing some of society’s most important issues. The report helped to catalyze today’s commitment, which aims to direct more capital into impact investment that intentionally generates financial returns, as well as measurable social or environmental impact.

The report found that the impact investing field is currently at an inflection point, enlivened by new energy but yet to realize its full potential. The authors write, “For impact investing to reach massive scale – bringing private capital to bear on our greatest problems – it will require a more intentional and proactive partnership between government and the private sector.”

In particular, the study highlights strategies and reforms that the government can undertake to “unleash new capital, talent, and energy for social, economic, and environmental good.” These policies, many of which do not require any additional government spending, include: removing regulatory barriers and providing incentives to spur additional private impact investment; increasing the effectiveness of government programs; encouraging and supporting innovative impact-oriented organizations and impact investment opportunities; and improving data capture methods to facilitate accurate, transparent impact measurement.

As the report makes clear, the impact investing industry in the U.S. is not new, but recent years have featured an impressive acceleration of the pace, forward momentum, and innovative thinking in the sector. Social Impact Bonds (SIBs), like the District of Columbia initiative announced today, are one such innovation. In this project, Social Finance is partnering with the District of Columbia government and Wyman Center’s Teen Outreach Program to develop the first ever Social Impact Bond focusing on teen pregnancy prevention. A diverse collaborative of community organizations will deliver this proven, evidence-based program to reduce the incidence of teen pregnancy and improve educational outcomes for thousands of young people in the District. Social Finance and the District of Columbia will work with other stakeholders in the SIB partnership – the Wyman Center, local service providers, investors, and at-risk youth – to craft a rigorous, data-driven project based on Wyman’s nationally recognized, evidence-based intervention.

This program is a prime example of the exciting momentum in the impact investment sector. This SIB-funded initiative will help the government tackle a persistent social challenge by mobilizing investment capital to drive social progress and directing resources toward what works. As a multi-sector collaboration where investors benefit if and only if society does too, this project embodies a fundamental principle of impact investing.

Entry by Lara Metcalf, Managing Director, and Jane Hughes, Director of Knowledge Management