Presentation of NISE! Impact Delivery Model. The NISE! social and environmental impact delivery model has as its primary objective the mainstreaming of Social Impact Bonds so that they become attractive as an asset allocation in the diversified portfolio of a prudent investor and, therefore, become a readily available source of capital.

1. 1
Pay for Success Contracts
and Social Impact Bonds
Presentation of NISE!
Impact Delivery Model
NATIONAL
INSTITUTE FOR A
SUSTAINABLE
ECONOMY
Building businesses for a 21st
century economy that are...
Sustainable.
Equitable.
Profitable.

2. 1NISE! SIB Delivery Model © 2011
Summary Benefits of NISE!
Delivery Model
The NISE! Delivery Model for effectively utilizing Pay for Success Contracts
and Social Impact Bonds has the following benefits and advantages relative
to the traditional model:
It will be more attractive to investors. Our objective is to
mainstream Social Impact Bonds so that they become attractive as
an asset allocation in the diversified portfolio of a prudent investor
and, therefore, become a readily available source of capital. As a
result, our model focuses heavily on the alignment of risks and
rewards for the investor by emphasizing:
Competitive commercial returns.
A financial structure that resembles more traditional ones.
Earlier, interim return of capital.
Multiple, diversified sources for the return of capital.
Sharing of the downside risk.
The Impact Delivery Organization will be better structured to
succeed. Another objective of our model is the proper capitalization
of Impact Delivery Organizations (IDO) so that they have a higher
probability of delivering the desired social or environmental impact.
Consequently, our model emphasizes:
An expanded role for the IDO as both a manager of service
providers and a financial intermediary capable of attracting and
managing capital.
Multiple, diversified sources of revenue for the IDO.
Government is not the sole source for repayment of SIB’s. The
third key objective of our model is making government a partner in

3. 2NISE! SIB Delivery Model © 2011
the payment for desired outcomes, rather than a sole
source. As a result, our model is designed to stimulate the
growth of new, private sector for-profit businesses that:
Generate revenues as they provided a product or
service delivering a social or environmental impact.
Contribute to the repayment of investors.
Proposed Area of
Implementation:
Energy Efficiency
We propose that energy efficiency be one of the initial target areas
to apply the use of the NISE! Delivery Model for the following
reasons:
Greater energy efficiency in Massachusetts’ private
and public homes and buildings is critical in order to
meet the State’s goals in reducing energy usage and
CO2 emissions. Under nation-leading energy efficiency
plans established by the Patrick-Murray Administration,
Massachusetts has chosen energy efficiency as its “first
fuel” – what is looked to first to meet the State’s energy
needs. While the State utilities have invested in home-
sealing, insulation, efficient lighting and appliances, the
State Executive Office of Energy and Environmental Affairs
(EEA) and the Massachusetts Clean Energy Center
(MassCEC) continue to recognize that the private and
public housing sectors still have not been active in
implementing energy efficiency measures and that help is
needed in finding new ways to assist these sectors in
advancing energy efficiency. The State’s energy efficiency
goals are connected to green community planning and
green jobs, and is a regional sustainable solution to a
nation-wide energy crisis and national security issue.
The first uses of Pay for Success Contracts and
Social Impact Bonds need to succeed. Applying the
NISE! Delivery Model to energy efficiency has the
advantage of beginning with an initiative that:
Can be established quickly. No special legislation is
required and the delivery mechanisms can be readily
assembled.
Is more easily measured in terms of impact. Baselines
can be established quickly and measurement
methodology and related devices are already well
known.
Can demonstrate positive results in a relative short
period of time -- less than 1 year.
Can have an impact that scales up quickly within the
Commonwealth or in other areas of the nation.
Accelerated energy efficiency efforts will be a
significant economic driver. It will:
Expand new and existing markets.
Create new jobs.
Stimulate new business opportunities.
i

4. 3NISE! SIB Delivery Model © 2011
Introduction
NISE!, the National Institute for a Sustainable Economy LLC,
initially presented the delivery model discussed in this document
in its response to the Request for Information issued by the
Patrick-Murray Administration through its Executive Office of
Administration and Finance. NISE! is a for-profit business based
in Boston, Massachusetts, and was founded in 2010 in response
to President Obama’s challenge to the private sector to lead a
new era of innovation and growth on the cutting edge of our
economy by finding new ways to tackle the intertwined problems
of energy and the environment. The founder of NISE!, Edward
Dugger III, who was among many from whom the Obama
Transition Committees sought advice regarding fresh ideas and
policy recommendations, decided to pursue this challenge by
establishing NISE!
The NISE! Mission
Our mission? Bringing to market new business solutions for
environmental and social problems that are…
Sustainable. Equitable. Profitable.
We pursue our mission by identifying a specific need or demand
and re-imagine a business model that will address it. We then
assemble a team of business collaborators to implement the
business model and the necessary resources. Often the NISE!
solution will also support the implementation of government policy
for which a private sector partner is needed.
For instance, we believe that energy conservation is our nation’s
most effective strategy for a reduction in the emission of C02 and
other greenhouse gases into our atmosphere. Historically
business and government have focused primarily on conservation
in the industrial and commercial sectors. Energy conservation in
the residential sector has lagged due to the perception that the
business opportunity is much more limited and requires subsidies
to be attractive. NISE! examined the barriers that have prevented
homeowners in particular from making homes more energy
efficient and concluded that the business opportunity was very
large and what was needed was innovation.
The NISE! and Massachusetts
Clean Energy Center Partnership
NISE! has developed a new business model in conjunction with its
collaborating partners that is designed to unlock the value of
conservation for consumers. In September 2010 our new
business model was recognized for its innovative approach to
energy conservation in residential homes by the Massachusetts
Clean Energy Center (MassCEC), a national leader in promoting
innovative initiatives in the areas of renewable energy and energy
efficiency. As a result of its competitive process, MassCEC
awarded NISE! a $250,000 working capital grant to further
develop its business model, complete its strategic plan and
prepare for a launch into the market.
Innovations in Financing Social and Environmental
Impact
In the same spirit of seeking solutions through innovation, NISE!
welcomes the challenge and opportunity to assist in the
development of a new financial instrument that will advance
improved outcomes in the areas of social and environmental
impacts. The founder of NISE! has over 25 years of experience in
the fields of venture capital and private equity and is
acknowledged as an early pioneer in social impact investing.
NISE!
A Catalyst for a Sustainable Economy

5. 4NISE! SIB Delivery Model © 2011
The Initial Request for Information
The Patrick-Murray Administration has an ongoing commitment to
changing the way government does business and to finding
savings and efficiencies across state agencies. They recognize
that many of the solutions they seek to reduce costs to taxpayers
and accelerate innovation in ameliorating social problems will
result from the Commonwealth partnering with entrepreneurs from
the nonprofit and private sectors. As a result, the Commonwealth
is considering whether to enter into a limited number of pay for
success contracts for the delivery of certain government services.
In preparation for the issuance of a Request for Responses, the
Patrick-Murray administration through its Executive Office of
Administration and Finance (EOAF) has solicited information from
potential partners and interested citizens regarding:
Areas of government activity where success-based
contracting strategies have the potential to improve
outcomes and/or reduce costs.
The use of social impact bonds to support pay for success
contracts. Social impact bonds are defined as financing
arrangements where third party investors and
intermediaries provide service providers with operating
capital and other expertise to support pay for success
contracts with the government.
The Basic Social Impact Bond Delivery Model (SIB)
As illustrated in the diagram, the basic Social Impact Bond is a
contract with the public sector in which it agrees to pay for
improved social outcomes.
On the basis of this contract, investment is raised from
socially motivated investors.
This investment is used to pay for a range of interventions to
improve social outcomes.
If social outcomes improve, investors will receive payments
from government.
These payments repay the initial investment plus a financial
return.
The financial return is dependent on the degree to
which outcomes improve.
Background
2Model
ry Model
Social Impact Investors
Impact Delivery Organization Government
Subcontractor Subcontractor
Outcome Based Agreement
Outcome Based Payment
$ Payment $ Payment
$ Assignment of Cash Flows
From Outcome Based
$

6. 5
Discussion
The major challenge of the basic SIB delivery model is the
alignment of incentives and risks. As indicated in the chart below,
each of the key players in this model have a unique set of
challenges to overcome to be motivated to engage as
collaborator.
Investors. In the current economic environment, investor
interest in competitive financial returns is particularly high.
New financial instruments that have no track record and
have an unknown of particularly long timeframe for the
return of principal and interest will generate little interest
even within the social responsible investment community.
Investors are likely to respond best to a new financial
instrument that resembles a traditional one, has a
competitive return, provides for the early return of capital
and has its downside risk mitigated.
Impact Delivery Organization. Whether or not a for-
profit or not-for-profit, the challenge of producing a targeted
social or environmental impact usually is complicated by
the difficulty of accessing capital in sufficient amounts over
time to bring the necessary resources to bear on the
problem at hand. Obtaining adequate capital for Impact
Delivery Organization (IDO) is critical to the success of this
type of endeavor.
Government Payer. Tight government budgets and
limited to no growth in tax revenues will put extreme
pressure on government administrators to err on the side of
minimal payments for outcomes, even given successful
scenarios. The approach of paying for improved outcomes
will be substantially advanced by having a partner in the
process.
The chart below highlights the challenges of each of the key
players and what we believe are the prerequisites for successfully
engaging them as collaborators in this new endeavor.
Prerequisites for Success
Key Players Issues Prerequisites for Success
Investors Desire for commercial returns.
New financial instrument with no track record.
Performance risk associated insufficient delayed
delivery of impact by the Impact Delivery
Organization.
Timeframe for producing measurable impact may
be long.
High probability of commercial return.
Financial structure that resembles more traditional
financial instruments.
Early return of capital.
Multiple sources for the return of capital.
Impact Delivery
Organization
Obtaining sufficient initial and ongoing operating
capital to produce impact.
Adequate capitalization to achieve impact.
Government Payer Performance risk associated with
undercapitalization of Impact Delivery
Organization.
Sole source of repayment.
Strong incentives for the proper capitalization of
Impact Delivery Organizations.
Diversification of repayment sources.

7. 6NISE! SIB Delivery Model © 2011
Objectives of NISE! Delivery Model
The NISE! social and environmental impact delivery model has as
its primary objective the mainstreaming of Social Impact Bonds
so that they become attractive as an asset allocation in the
diversified portfolio of a prudent investor and therefore become a
readily available source of capital. As a result, our model focuses
heavily on the alignment of risks and rewards for the investor by
emphasizing:
Competitive commercial returns.
A financial structure that resembles more traditional ones.
Earlier, interim return of capital.
Multiple, diversified sources for the return of capital.
Sharing of the downside risk.
Our model also has as its objective the proper capitalization of
Impact Delivery Organization (IDO) so that they have a higher
probability of delivering the desired social or environmental
impact. Consequently, our model emphasizes:
An expanded role for the Impact Delivery Partner as both a
manager of service providers and a financial intermediary
capable of attracting and managing capital.
Multiple, diversified sources of revenue for the IDO.
Finally, our model has as its objective making government a
partner in the payment for desired outcomes, rather than a
sole source. As a result, our model is designed to stimulate the
growth of new, private sector for-profit businesses that:
Generate revenues as they provided a product or service
delivering a social or environmental impact.
Contribute to the repayment of investors.
Use of Social Impact Bonds
The NISE! social and environmental impact delivery model
anticipates a broader use of funds derived from social impact
bonds than does the basic delivery model. In addition to the
Impact Delivery Organizations using the capital to fund their
operations and pay fees to service providers, we expect there will
be a strong demand for use of the funds as financing to:
Service providers to expand their working capital to fund
their growth.
Customers of service providers to finance the purchase of
goods and services that are part of the delivery of desired
social and environmental impacts.
The demand we anticipate will be driven by the emergence of
entrepreneurial enterprises -- both new and old -- pursuing new
market opportunities for which the initial demand is uncertain, and
therefore the availability of more traditional sources of capital is
limited.
Description of the NISE! Delivery Model
The diagram on the adjacent page highlights the key components
and players of the NISE! delivery model.
Social Impact Investors. In our model social impact
investors are both those that conscientiously want to
have a social or environmental impact through their
investment in social impact bonds and those that seeking
portfolio diversity at competitive commercial returns. Both groups
would include individuals as well as institutional investors.
Bond Issuer. Although in our model the Impact
Delivery Organization would usually be the entity
issuing bonds, in some cases there would be a
separate entity that would issue the social impact bonds in
partnership with the Impact Delivery Organization. Such an entity
could be a quasi-government entity such as Mass Development.
NISE! Delivery Model
1
2

8. 7NISE! SIB Delivery Model © 2011
Impact Delivery Organization. Central to the
success of the NISE! delivery model is the Impact
Delivery Organization. Although this entity may be
either a for-profit or not-for-profit organization, our model
favors the IDO as a for-profit enterprise that has the capacity to:
Generate revenues from multiple sources.
Raise capital from private investors.
Negotiate outcome based contracts with government.
Hire and manage service providers.
The IDO would generate revenue from three primary sources:
Fees paid for services it renders as both a manager of
service providers and as financial intermediary.
Financial returns from providing financing to service providers
and/or their customers.
Payments from government for outcomes.
These multiple sources of revenue would reduce the risk to
investors and encourage their greater participation in this new
form of financing. They would also allow the IDO to partner with
government in the payment to investors their share of returns for
successful outcomes.
Government. In the NISE! delivery model, the role of
government changes significantly. Rather than simply
a sole source of payment for social and environmental
outcomes and the repayment of investors, the
government is a partner with the IDO in the repayment of
investors and plays two distinct roles:
3
Outcome Based Payment
Bond
Social Impact Investors
Impact Delivery Organization Government
Bond Issuer
For Profit
Delivery Partner
Impact
Beneficiary
Credit & Return
Enhancement Agreement
$ Repayments$ Payments and/or Financing $ Financing
$
Note$
5
43
2
1
6
4

9. 8NISE! SIB Delivery Model © 2011
The source of a credit enhancement that substantially
reduces the investment risk to investors.
The source of a return enhancement that is derived from
outcome based payments and reflect successful impacts.
Government would negotiate both the credit and return
enhancements with the IDO in order to strengthen the IDO’s ability
to raise capital on a competitive commercial basis.
For Profit Delivery Partner. Assisting the IDO in
achieving the desired social and environmental
outcomes, the For-Profit Delivery Partner would
generally be part of a group of businesses working
collaboratively to produce both a high level of impact and multiple
revenue sources that indirectly contribute to the repayment of
investors. Specifically these businesses would be a source of
revenue for the IDO in the form of management fees and a
financial return for financing provided to them.
Impact Beneficiary. In the NISE! delivery model the
Impact Beneficiary is the end-user of the products,
services or financing provided by the IDO and its
collaborating organizations. In some cases the end-user
may be itself an organization, while in others it would be individual
or family consumers.
i
5
6

10. 9NISE! SIB Delivery Model © 2011
An Example: NISE! Impact LLC
NISE! Impact LLC is our example of how we would organize an
effective Impact Delivery Partner (IDP) that is designed to provide
comprehensive Financial Services and Impact Services. As
described below, the components of each could be wholly-owned
by NISE! Impact or structured as service agreements with other
independent firms. NISE! Impact would have overall responsibility
for the management of the Financial and Impact Service Groups
and the marketing of each. It would also be responsible for
structuring and issuing the Social Impact Bonds (SIB).
Financial Services
Services that fall into this category represent the full complement
of services necessary to design, place/distribute and manage the
Social Impact Bond Portfolio, as well as to management the
portfolio of investments made utilizing capital generated by
theSIBs. They include:
Portfolio Management. This component would be an
internal service group of NISE! Impact. It would be
responsible for evaluating and selecting the organizations
that would receive the capital made available by SIBs.
Once the capital was invested, this group would also
management the resulting investment portfolio.
Asset Management. This group would be responsible for
the placement or selling of the SIBs as well as managing
the cash reserves of NISE! Impact. It would include both
an asset management and broker/dealer operation.
Investment Advisory. This component would be
responsible for assisting portfolio companies and other
businesses in raising capital for their working capital and
expansion needs. In some cases it would work closely with
the portfolio management group to place SIB capital and in
others it would raise capital from other sources.
Impact Services
This category of services represent those needed to manage the
impact delivery process beginning with contract negotiations and
ending with the certification of performance results. They include:
Contract Services. This component would be an internal
service group of NISE! Impact. It would be responsible for
working with prospective impact delivery organizations (not
for profit or for-profit) to negotiate pay-for-success
contracts with government agencies, monitoring contract
performance and assisting in the evaluation of impact
results.
Strategic Planning. This group would also be an internal
service group of NISE! Impact. t would be responsible for
assisting portfolio organizations in developing high
performance strategic plans for delivering the expected
impact.
Tactical Assistance. This component would be
responsible for providing portfolio organizations with advice
and assistance on tactical issues important to
implementing a strategic plan and achieving the desired
performance results. i
NISE! Impact LLC
A Unique Financial and Impact Delivery Organization
8NISE! SIB Delivery Model
An Example: NISE! Impact LLC
NISE! Impact LLC is our example of how we would organize an
effective Impact Delivery Partner (IDP) that is designed to provide
comprehensive Financial Services and Impact Services. As
described below, the components of each could be wholly-owned
by NISE! Impact or structured as service agreements with other
independent firms. NISE! Impact would have overall responsibility
for the management of the Financial and Impact service groups
and the marketing of each. It would also be responsible for
structuring and issuing the Social Impact Bonds (SIB).
Financial Services
Services that fall into this category represent the full complement
of services necessary to design, place/distribute and manage the
Social Impact Bond Portfolio, as well as to management the
portfolio of investments made utilizing capital generated by the
SIBs. They include:
Portfolio Management. This component would be an
internal service group of NISE! Impact. It would be
responsible for evaluating and selecting the organizations
that would receive the capital made available by SIBs. Once
the capital was invested, this group would also management
the resulting investment portfolio.
Asset Management. This group would be responsible for
the placement or selling of the SIBs as well as managing the
cash reserves of NISE! Impact. It would include both an
asset management and broker/dealer operation.
Investment Advisory. This component would be
responsible for assisting portfolio companies and other
businesses in raising capital for their working capital and
expansion needs. In some cases it would work closely with
the portfolio management group to place SIB capital and in
others it would raise capital from other sources.
Impact Services
This category of services represent those needed to manage the
impact delivery process beginning with contract negotiations and
ending with the certification of performance results. They include:
Contract Services. This component would be an internal
service group of NISE! Impact. It would be responsible for
working with prospective impact delivery organizations (not
for profit or for-profit) to negotiate pay-for-success contracts
with government agencies, monitoring contract performance
and assisting in the evaluation of impact results.
Strategic Planning. This group would also be an internal
service group of NISE! Impact. It would be responsible for
assisting portfolio organizations in developing high
performance strategic plans for delivering the expected
impact.
Tactical Assistance. This component would be
responsible for providing portfolio organizations with advice
and assistance on tactical issues important to implementing
a strategic plan and achieving the desired performance
results.
NISE! Impact LLC
A Unique Financial and Impact Delivery Organization
NISE! Impact LLC
FINANCIAL SERVICES IMPACT SERVICES
Asset Management
Investment Advisory
Portfolio Management
Strategic Planning
Tactical Assistance
Contract Management
e
3

11. 10NISE! SIB Delivery Model © 2011
Energy Efficiency: A Public Policy Imperative
Under nation-leading energy efficiency plans established by the
Patrick-Murray Administration, Massachusetts has chosen energy
efficiency as its “first fuel” – what is looked to first to meet the
State’s energy needs. While the State utilities have invested in
home-sealing, insulation, efficient lighting and appliances, the
State Executive Office of Energy and Environmental Affairs (EEA)
and the Massachusetts Clean Energy Center (MassCEC) continue
to recognize that the private and public housing sectors still have
not been active in implementing energy efficiency measures and
that help is needed in finding new ways to assist these sectors in
advancing energy efficiency. The State’s energy efficiency goals
are connected to green community planning and green jobs, and
is a regional sustainable solution to a nation-wide energy crisis
and national security issue. Greater energy efficiency in
Massachusetts’ private and public homes and buildings is
critical in order to meet the State’s goals in reducing energy
usage and CO2 emissions.
Based on one of its own business models, NISE! believes a social
impact bond that invests in innovative energy efficiency
management could have the ability to save 20% of current energy
use in 50,000+ private homes across Massachusetts in the next
three years. In addition, a Social Impact Bond associated with the
State Department of Housing and Community Development and
the State Department of Capital Asset Management would allow
the State to also reduce energy consumption by approximately
10-20% in their public housing stock of residential homes and
buildings. This effort would also serve to save the State
approximately 10-20% in public housing energy cost given that
the State is responsible for paying a portion or all of a public
housing tenant’s energy bill.
A social impact bond for energy efficiency could allow the State to
meet its energy goals, provides energy cost savings for
Massachusetts’ residential consumers and the State while
reducing future budgetary costs for the State.
A Proposed Focus:
Energy Efficiency

12. 11
Key Components
A model Pay for Success Contract for energy efficiency has the
following components:
Objective. To accelerate the adoption of energy
conservation systems in residential properties throughout
the Commonwealth.
Metric. The number of residences with newly installed
energy conservation systems that reduce energy
consumption by 10% or more.
Payment for Success.
$500 per residence for each installed energy
conservation system that achieves energy savings of
10% or more.
$250,000 for every 5,000 residences that achieves
metric within 18 months.
Addendum
Model Pay for Success Contract for Energy Efficiency
NISE!
40-A Orchardhill road Boston, MA 02130
www.usnise.com
For more information contact:
Edward Dugger III, eduggeriii@usnise.com