You may have heard about “pay for success financing,” also called “social impact bonds,” the new kind of financing that is capturing the imagination of government, foundations, socially minded investors and social service programs around the world. Invented in the United Kingdom in 2010, pay- for-success financing (PFS) is designed to bring substantial new financing to programs whose long-term benefits to society—and savings to government—exceed their costs. What is this new financing mechanism all about? Can it be used to bring new resources to population health improvement programs and shift resources from treatment to prevention? A feasibility study I conducted for the Institute for Child Success (ICS) with offices in both Greenville and Columbia, S.C., helps explain how PFS works and can be applied to population health and improve health outcomes.

Pay-for-success financing grew in part out of an emerging interest among investors in putting their money in ventures that not only generate a financial return, but also make the world a better place. At the end of 2010, JP Morgan and the Rockefeller Foundation produced a report called “Impact Investments: An Emerging Asset Class.” It found that there is a growing number of individuals, foundations, banks and other investors who are interested in creating positive impact beyond financial return; the estimated size of that market is $400 million to $1 trillion over 10 years.