Eoghan Murphy (Dublin Bay South, Fine Gael) | Oireachtas source

I thank Senator Swanick for raising the matter of the Ireland Strategic Investment Fund, commonly referred to as the ISIF, and certain investments made by that fund. I raised this issue as an area of concern in the previous Dáil.

By way of introduction and context, it is helpful to consider the evolution of the ISIF's investment portfolio. On the 22 December 2014, the National Pensions Reserve Fund, NPRF, transitioned to the ISIF. The ISIF has a statutory double bottom line mandate to invest on a commercial basis to support economic activity and employment creation in Ireland. Certain shareholdings which were inherited from the NPRF and which are in companies based outside Ireland are held in the ISIF's global portfolio. The global portfolio has undergone significant restructuring since 2014 and is being sold, over time, to fund Irish investment commitments as they arise. This approach provides capital for investment in Ireland.

The ISIF commits to reviewing all of its investments for exposures to sectors and-or companies with potentially controversial business exposures and associated reputational risks, to ensure they are addressed and mitigated as appropriate. I can inform the Senator that the ISIF currently has equity holdings in four companies operating in the brewers, distillers and vintners category. These investments have a value of €3 million. The ISIF also has equity holdings in three tobacco companies. These investments have a value of €1.6 million. As of 30 August 2016, these alcohol and tobacco investments in total represent 0.06% of the lSlF's total assets. These investments are within the ISIF's global portfolio. They are legacy investments inherited from its predecessor, the NPRF. These investments do not form part of the ISIF's new mandate, which was formed at the time of its establishment in December 2014.

Such investments should be considered in the context of the broader portfolio of the fund and the fund's commitment to responsible investment. The ISIF's mandate is aligned with sustainability principles, in terms of investment opportunities and risk management. The fund recently published its sustainability and responsible investment policy, which is available on its website. The fund operates to high international standards and invests in line with the UN-sponsored principles for responsible investment, which focus on the management of environmental, social and governance factors to improve sustainability of investment returns, and the Santiago principles, which are the globally accepted best practice principles for sovereign investment funds such as the ISIF. The fund implements its sustainability and responsible investment policy in a number of ways, but primarily by focusing on the integration of environmental, social and governance factors into its investment decision making pre-investment; and by being an engaged and active owner of its investments to positively influence companies.

Exclusion has not been part of the fund's responsible investment strategy, with the only exclusions from the fund being mandated by legislation. To date, the Cluster Munitions And Anti-Personnel Mines Act 2008 is the only relevant legislation, and the ISIF operates a prohibited securities list of 14 companies on this basis. There is currently no basis for tobacco or alcohol exclusions in legislation.The ISIF has committed to a review of its exclusionary policy. ISIF senior management and the NTMA board investment committee have agreed to review the current prohibited securities policy to examine the potential of adding to the list of excluded investment categories. A review of the ISIF exclusionary policy is under way and is expected to be completed by the end of the first quarter of 2017. The review of the ISIF exclusionary policy is under way separate to the ISIF investment strategy review. Given the new and unique mandate of ISIF as a sovereign development fund, and because of the uncertainty regarding the investment opportunities in Ireland, it was agreed at the time of the establishment of ISIF in December 2014 that a formal review of the ISIF investment strategy would take place after 18 months. This allows for a sufficient period of time having elapsed before considering the operations and impact of the fund.

I am informed by ISIF that preparatory work in respect of this formal review of its investment strategy has commenced and the review is due to be completed by the end of 2016. The review will include an appraisal of the success of ISIF's mandate to date. The NTMA (Amendment) Act 2014 provides that ownership of the fund vests with the Minister for Finance. It also provides that the fund shall, in reviewing its investment strategy, consult the Minister for Finance and the Minister for Public Expenditure and Reform. The review of the ISIF will be conducted in accordance with these provisions. In addition, the legislation provides that the Minister for Finance may consult with other Government Ministers, as appropriate.