The Ireland Strategic Investment Fund (ISIF) was established with a "double bottom line" mandate to invest on a commercial basis in a manner designed to support economic activity and employment in Ireland.
In accordance with this double bottom line objective, ISIF investments are assessed by reference to both risk-adjusted investment return and economic impact. Investing on a risk-adjusted commercial basis means that, in respect of each and every investment, there is an expected return for the ISIF from the investment and this expected return is commensurate with the risk involved.
As a means of validating the commerciality of potential investments, ISIF seeks co-investment by private sector investors. In cases where ISIF may be the only investor, the ISIF seeks to have the proposed transaction pricing benchmarked against market indicators to establish that the investment is on a commercial basis.
In terms of economic impact, the key principle underpinning ISIF's investments is "additionality" ISIF is seeking to invest where its money can make a difference and help to generate economic activity that would otherwise not occur. ISIF's key differentiating features of flexibility, long-term timeframe and being a sovereign partner means that it can fill investment gaps and respond to strategic imperatives in the Irish economy in a way that conventional market financiers may be unable or reluctant to finance.
In the context of ISIF's investment focus on promoting economic additionality (benefits to GDP which arise as a result of the investment) it seeks to avoid deadweight (where the economic impacts would have been achieved in any event in the absence of the investment) and displacement (where the investment will simply substitute for existing economic activity).
Copies of ISIF's Economic Impact Reports for the period to end-December 2015 are available on the ISIF website at http://www.isif.ie/news/publications/. These reports identify the metrics used to measure the economic impact of ISIF investments which include measures such as employment, turnover, exports and Gross Value Added.
Further detail on ISIF's investment criteria is set out in the Executive Summary of the Fund's Investment Strategy, which is available on the ISIF website at http://www.isif.ie/wp-content/uploads/2016/03/ISIFInvestmentStrategyExecutiveSummaryJuly2015.pdf. The National Treasury Management Agency (Amendment) Act 2014, which established the ISIF on a statutory basis, provides that the ISIF shall review its investment strategy after 18 months of operation. This review will be conducted in the second half of 2016.
The Deputy will note that the mandate given to ISIF by the Oireachtas at inception had the effect of making ISIF one of the world's first sovereign development funds with an explicit mandate to assist in the development of its local economy. This so-called "sovereign development fund" concept is new, which means there is no comparable precedent for operation of such an investment fund and, as a result, ISIF's strategy and approach can be regarded as pioneering. However, the concept has proven to have significant appeal and many other countries continue to express interest in learning about how ISIF is managing its double bottom line mandate.
