Follow us

Further to our last update on the establishment of the National Reconstruction Fund (NRF) in Australia, the National Reconstruction Fund Corporation (Investment Mandate) Direction 2023 (Investment Mandate) has now been released.  

What is the purpose of the Investment Mandate?

The purpose of the Investment Mandate is to give the National Reconstruction Fund Corporation (the Corporation) directions about its investment functions and powers to ensure it invests in priority areas that will support and improve Australia’s industry and economy and deliver a positive return to the Australian Government.

The Minister for Industry, Ed Husic and the Minister for Finance, the Hon Katy Gallagher have described the Investment Mandate as “unlocking billions of dollars in investment finance to rebuild Australia’s competitiveness across the manufacturing value chain”.

We have set out a summary of the key directions in the Investment Mandate below.

What directions are given in the Investment Mandate?

Portfolio benchmark return

The Corporation must target a cumulative average return of 2-3 per cent above a five-year Australian Government bond rate as the benchmark return of the Corporations portfolio over the medium to long term.

Performance against the portfolio benchmark return will be measured before deducting the Corporation’s operating expenses.

The Investment Mandate Explanatory Memorandum notes that proponents should not expect to receive financing at the portfolio benchmark return as the actual returns will be risk-adjusted to reflect individual characteristics of each project, operating expenses of the Corporation, the requirement to target the benchmark return on a portfolio basis, and public policy outcomes.

It is intended that the portfolio benchmark return will be reviewed every three years to ensure it remains appropriate.

Acceptable level of risk

The Corporation must take a commercial approach to develop a diversified portfolio that has an acceptable but not excessive level of risk, which includes undertaking due diligence and credit and investment risk processes.

The Investment Mandate notes that an acceptable level of risk may be higher than the risk tolerance of banks and private sector investors, if the higher risk supports the objects of the National Reconstruction Fund Corporation Act 2023 (NRFC Act) and the Investment Mandate. It also states that the Corporation may take on higher risk for investments in emerging technologies and industries, investments that support national security, sovereign capability or supply chain resilience, or projects with longer term payback periods.

The Investment Mandate Explanatory Memorandum notes that it is expected this will result in short-term volatility in the Corporation’s returns, including the possibility of losses where asset performance is worse than expected. This reflects why the portfolio benchmark return will be measured over the medium to long term.

Investment considerations

When making an investment decision, the Corporation must consider the matters set out in section 17(3A) and (4) of the NRFC Act, which includes:

  • transforming Australia’s industry and economy;
  • attracting private sector finance or investments;
  • supporting Australia’s greenhouse gas emissions reductions targets and decarbonisation;
  • creating secure jobs and a skilled and adaptable workforce;
  • enhancing Australia’s resilience against supply chain vulnerabilities;
  • encouraging commercialisation of Australian innovation and technology;
  • encouraging and improving economic participation by underrepresented groups, including women, First Nations Australians, people with a disability and people of culturally and linguistically diverse backgrounds.

The Corporation must also consider supporting sustainability and circular economy principles and solutions, regional development and national security.

Targeted financing levels

The Corporation must target the following funding levels over the medium to long term:

  • renewables and low emission technologies – up to $3 billion;
  • medical manufacturing - $1.5 billion;
  • value adding in resources - $1 billion;
  • critical technologies in the national interest - $1 billion;
  • advanced manufacturing - $1 billion; and
  • agriculture, forestry, fisheries, food and fibre - $500 million.

The Investment Mandate notes that these financing levels do not correspond exactly with the priority areas specified in the National Reconstruction Fund Corporation (Priority Areas) Declaration 2023 (the Declaration) (which we outlined in our previous article) however, investments in a single priority area can count towards any other appropriate target or targets set out above.

Interaction with other investment schemes

The Corporation must consider the impacts of investment decisions on other market participants and the Australian financial market, and if reasonably practicable, avoid competing with private sector investment or other Government entities who are already supporting investment in the priority areas set out in the Declaration.

It is intended that the Corporation complement and attract additional private and public sector investment to avoid duplication. This may include co-investing where appropriate.

Limits on the Corporation’s powers

Section 16 to 18 of the Investment Mandate restricts the powers of the Corporation by limiting its ability to:

  • provide concessional financial accommodation unless it is the most appropriate way to achieve public policy outcomes and is based on a reasonable qualitative assessment;
  • take a controlling equity stake in any entity; and
  • provide guarantees unless it is the most appropriate way to achieve public policy outcomes and the total value does not exceed 5 per cent of the total amount that has been credited to the Corporations Special Account.1

Key takeaways

  • While the Investment Mandate is relatively concise and high-level, it provides the Corporation with flexibility to operate on a commercial, independent basis.
  • The directions support the key priority areas outlined in the Declaration and provide clarity on the returns and financing levels the Corporation is expected to achieve.
  • The NRF could provide opportunity for investment in higher-risk areas that banks and private sector investors would deem unacceptable.

HSF has extensive experience acting for both government and the private sector on transactions involving the provision of grants, loans or other agreements. Please reach out to our key contacts if you have any queries.


  1. As defined in section 5 of the NRFC Act.

Key contacts

Nicholas Carney photo

Nicholas Carney

Global Co-Head of Infrastructure, Sydney

Nicholas Carney
Aaron White photo

Aaron White

Partner, Brisbane

Aaron White
Erin Wakelin photo

Erin Wakelin

Partner, Sydney

Erin Wakelin
Nick Baker photo

Nick Baker

Partner and Global Co-Head of Energy, Melbourne

Nick Baker
Australia Nicholas Carney Aaron White Erin Wakelin Nick Baker