New York Becomes the First State to Launch a Social Impact Bond

Update: On March 11, 2014 and in a commitment to increasing transparency in the social impact bond market, Social Finance US and New York State released the official details of their social impact bond launched with the Center for Employment Opportunities, Bank of America Merrill Lynch, Chesapeake Research Associates, and others investors. The SIB is aims at increasing employment and reducing recidivism among 2,000 formerly-incarcerated individuals in New York State. New York State is now the second to produce the details of their transaction (after Massachusetts) and such an effort will surely help the field learn so that Pay for Success contracts can continue to evolve and improve.


Please find the details in the documents below: 


Announced by Governor Cuomo in the final days of 2013, New York is now the first state to launch a social impact bond. As with all social impact bonds - a type of Pay for Success model - the intention is to raise private capital to finance a social intervention which generates a cost savings within government. If the prescribed outcomes of the intervention are achieved (this is determined by an independent evaluator) as of the contractually set date, the investors are paid from the savings enjoyed by government. 

In this case - as in many - the issue is recidivism. Social Finance US is acting as the intermediary in the transaction and led the charge on identifying the deal participants and structuring the transaction. The Center for Employment Opportunities (CEO) will be delivering the intervention of training and employment services to the target population of 2000 previously incarcerated individuals who are at high risk of reoffending. CEO is a highly regarded, data-driven nonprofit. The independent evaluator is Chesapeake Research Associates and they will be tasked with evaluating the results of the randomized control trial; the outcomes payments to investors will be contingent upon these results.

The $13.5 million of equity capital provided by more than 40 investors came predominantly from a lending wealth management platform through Bank of America Merrill Lynch and US Trust. Robin Hood Foundation invested $300,000 and The Rockefeller Foundation - a major proponent of Pay for Success models - put up $1.32 million as a 10% investment guarantee. The minimum investment was $100,000, the average investment was about $300,000, investor type was equally split between individuals and institutions (largely foundations), and notable investors include former U.S. Treasury Secretary Larry Summers, James Sorenson and the Laura and John Arnold Foundation. 

The term on the SIB is five and a half years beginning this month (December 2013) and investors can earn up to a 12.5% return. The goal of the intervention is to reduce recidivism among the target population by 8% and to increase employment by 5%. If either - or both - of these outcomes are achieved, then investors will be repaid; if the outcomes surpass these goals, then investors will receive a proportionally larger pay out; and if the outcomes are not achieved, then investors stand to lose all but 10% of their investment. 

In September, the New York State Department of Labor received a $12 million Workforce Innovation Fund Grant from the Federal Department of Labor to support the project. Please see here for more information. For the first cohort of 1000 individuals, the outcomes payments will be paid by the Federal Department of Labor and outcomes payments for the second cohort will come from New York State. If the intervention achieves the prescribed outcomes, it could generate $7.8 million in cost savings. 

For more information: 

New York State Press Release

Bank of America Merrill Lynch Press Release

Social Finance US Deal Summary

Reuters. "Merrill taps rich investors for ex-convict social-impact bond" (12.30.13)

American Banker. "B of A Clients Hope to Profit from Fall in Incarceration Rates" (12.31.13)

The Nonprofit Times. "$13 Million In Social Investment Bonds Might Pay 12.5%" (12.31.13)

The Christian Science Monitor. "'Pay for success' social-impact bondshelp train ex-convicts" (1.7.2014)






Resource Type



Nonprofits/Service Providers
US Federal Government
US State/Local Government
Private/Corporate Investors
Foundation/Philanthropic Investor
Evaluators/Impact Measurement Specialists


Social Impact Investing
SIB Models and Structures


Pay for Success
social impact bond
Social Finance
New York
Center for Employment Opportunities
Bank of America
Merrill Lynch
US Trust
Robin Hood
Chesapeake Research Associates
Jones Day