This paper draws on the ARPIP literature review, which included detailed analysis of the costs and benefits reported for about 40 PFM cases from around the world (Schreckenberg et al., in press). We begin by outlining different ways in which PFM can contribute to livelihoods and then highlight some potential negative impacts. We go on to examine in turn a number of contextual and design factors that determine whether a particular type of PFM is likely to have more positive or negative impacts. Finally, we examine some of the challenges PFM faces in areas with high value environmental goods and services and provide some suggestions for how to ensure that PFM benefits the poorest in these situations.