Bank of America launches social impact financing

Bank of America said Monday that it has launched its first "social impact partnership" with the state of New York, joining Wall Street's biggest banks in the innovative nonprofit funding model.

How it works: Bank of America Merrill Lynch raised $13.5 million from high-net-worth customers and institutional investors. The money is going to Center for Employment Opportunities, an established New York nonprofit that trains inmates in NYC and Rochester for employment.

They'll work with 2,000 inmates over four years. If the nonprofit is successful in its goals, such as reducing recidivism, the U.S. Department of Labor and the state of New York will pay back Bank of America's investors. The program is also known as "Pay for Success."

The Observer first reported that Bank of America was eyeing this type of financing program. At the time, New York City had recently announced the first social impact financing project in the country, with Goldman Sachs. They're viewed as a cost-saving way for governments to fund social programs.

The "Pay for Success" program marks the second socially conscious new investment Bank of America has announced in as many months. In November, the bank said it had issued a $500 million "green bond," with proceeds going to fund sustainable energy projects.

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