The Ireland Strategic Investment Fund (ISIF) steered deftly through turbulent times in H113, securing a 1.7% return, contributing EUR136 million to the sovereign wealth fund’s overall value and helping to support the nation's green transition goals.
The fund reached EUR10.8 billion by end-June, representing a five-fold increase over the level it started with in 2014 and just under 2% of national GDP. It has also secured co-investments in the Irish economy totalling EUR6.6 billion over the past decade, helping to support nearly 42,500 jobs by end-2022.
Unlike “rainy day” stabilization funds or inter-generational government savings fund that prioritize value-added, the Irish investor has a strategic mandate and results are defined more by economic impact on the domestic economy. As such, ISIF’s investment profile has tended to lead to lower-than-average returns. Nevertheless, in H1 it beat bigger peers, with Norway’s NBIM reporting -2.1%, Australia’s Future Fund -0.5% and Japan’s GPIF -0.3% in H1, and by end-June its gross value added totalled EUR2.3 billion.
Over the first half of the year, the fund made EUR311 million of investments in nine assets, including EUR119 million for its climate portfolio. It appears to be gaining momentum in deals and stepping up activity. In 2022, ISIF invested around EUR500 million in 12 transactions, the biggest portion of which was a EUR200 million debt facility for flag carrier Aer Lingus to support connectivity and recovery.
ISIF is supporting the government’s Climate Action Plan 2023 which targets 80% of electricity to come from renewable sources by 2030 with a EUR1 billion, five-year investment program, more than EUR500 million of which has already been committed, up from EUR285 million at the end of September 2022.
One of the big highlights of the year is a EUR94 million commitment to Octopus Energy Generation’s Sky Fund (ORI SCsp) for investment in renewable energy projects. As part of the deal, Octopus Energy Generation is establishing an office in Dublin to direct investment in green energy projects on the emerald isle.
The big question going forward is how ISIF’s climate fund can distinguish itself from the planned Infrastructure, Climate and Nature Fund (ICNF). As set out by Minister for Finance Michael McGrath in his 2024 budget, the ICNF is set to reach EUR14 billion by 2030, rising by EUR2 billion annually, starting with seed funding through the dissolution of the National Reserve Fund as well as a portion of windfall corporate tax receipts. It is intended to do what is says on the tin: support Ireland’s infrastructure growth, particularly in an economic downturn, and back environmental projects and will be invested in high-return, short-term instruments. The ICNF will operate alongside the planned Future Ireland Fund (FIF), which is set to exceed EUR100 billion within 10 or so years and is dedicated to inter-generational savings, particularly the impact of an ageing population.
In Global SWF’s 2023 Governance, Stability and Resilience (GSR) scoreboard, ISIF is joint fifth globally alongside Australia’s Future Fund and Spain’s COFIDES, as well as Canadian public pension funds CPP Investments and BCI, the Netherlands’ PGGM and Thailand’s GPF. The Irish fund received full marks for sustainability and resilience scores, but was just one mark off for governance reporting, leading to an overall GSR score of 96% - beating giants like Saudi Arabia’s PIF and Norway’s NBIM.