Pay for performance contracts focus a diverse set of actors on the effective use of limited public and donor funds to create and sustain environmental outcomes. The components involved in pay for performance contracts are consistent across different strategies.
PAY FOR PERFORMANCE TOOLKIT
Actors
Conservation Buyers
Public agencies, nonprofits, or private organizations that spend money on habitat conservation and water quality with the intent of achieving defined environmental goals.
Mitigation Buyers
Entities that purchase environmental outcomes to offset impacts from development and satisfy regulatory requirements.
Investors
Private equity managers, investment bankers, commercial bankers, or foundation investment managers that finance habitat or water quality projects with the intent of achieving a financial or environmental return on investment.
Producers
Landowners, engineers, or environmental professionals who design and implement environmental improvement projects.
Administrator
An entity that manages a pay for performance strategy. The administrator’s role can include defining metrics for desired environmental outcomes, conducting monitoring and verification, structuring contracts and financing terms, and connecting conservation and mitigation buyers with producers. Third-parties can also fulfill these roles.
Components
Environmental Outcomes
Measurable units of environmental benefit, such as habitat created or pollutant reductions achieved, that serve as the basis for payment in pay for performance contracts.
Contract Mechanisms
Solicitations, such as requests for proposals, and contracts between buyers and producers that use environmental outcomes as terms for payment.
Capital
Financing for project implementation that is intended to be paid back once the producer receives payment from delivering environmental outcomes.
Payment
Money paid after environmental outcomes are achieved.
Certified Credit
A representation of the verified outcomes achieved, as defined in the pay for performance contract. Credits act as the conservation “currency” that can be bought or sold between producers and conservation or mitigation buyers.
