Partial Pay for Performance


Partial pay for performance provides an incentive for producers to deliver environmental outcomes in order to receive a secondary payment upon delivery. The secondary payment reduces the conservation buyer’s risk of funding an ineffective project, but the buyer still assumes a significant risk of financial loss if the project does not deliver intended results.

 

Partial pay for performance is most appropriately used when producers have limited access to capital and investors are unlikely to engage due to uncertainty around demand and/or risk, or there is limited confidence in the quality of the unit used to measure environmental outcomes.

 

Distinguishing Characteristics

 

  • Conservation Buyers cover a portion of upfront costs to implement a project

  • Producers receive a secondary payment based on environmental outcomes achieved

 

 

Refer to the Actors page for descriptions of each component.

 

 

Payment Structure 

 

The diagram below illustrates an example payment structure for a partial pay for performance contract. The buyer pays the producer upon completion of project design and construction phases, upon initial verification of environmental outcomes, and periodically throughout the stewardship term as outcomes are verified. The payments made to the producer during initial and ongoing verification are typically made in multiple, smaller payments, while payments made in the project design and construction phases are typically made in single, larger payments upon completion of action-based milestones.

 

 

 

Next Up: Seed Funding Strategy

 

 

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