Internet Explorer 11 (IE11) is not supported. For the best experience please open using Chrome, Firefox, Safari or MS Edge

The Infrastructure Climate and Nature Fund

The establishment of an Infrastructure, Climate and Nature Fund was hailed as a landmark moment when announced by Minister Michael McGrath in Budget 2024. However, our Construction, Infrastructure & Utilities team explores if the fund’s planned structure and legislative basis will be enough to ring-fence infrastructure spending, so that long term spending is maintained in recessions.

They also examine if the fund will give industry confidence that Ireland has a strong pipeline of projects and whether this will help prevent infrastructure deficits in future, like we currently see in housing.

Purpose of the Fund

The Infrastructure, Climate and Nature Fund (ICN Fund) aims to prevent pro-cyclicality in capital spending. Essentially, money will be taken out of the economy when it’s running hot which will be used to establish a reserve over time, which in turn will support capital expenditure through the business cycle, including in future downturns. The aim is to prevent a reoccurrence of ‘stop-start’ public capital investment that we have experienced in the past and to avoid all the associated problems with this.

Essentially, buoyant tax revenues would be saved in periods of strong economic growth, and as a means of taking heat out of an economy with low unemployment and high inflation. In a recession, these funds would be deployed to offset temporary revenue shortfalls.

It would also support economic growth during a downturn, with the spending on capital projects resulting in knock on spending in the broader economy. It should ensure that the relevant expertise required for capital projects like builders, engineers, architects, etc. are not lost to the State as was the case following the Global Financial Crisis.


It is intended that €2bn will be invested in the ICN Fund each year from 2024 to 2030, building up to €14bn. The level of contribution will be limited to €14bn which equates to 5% of Gross National Income, the current annual target for capital expenditure under the National Development Plan. However, spending under the National Development Plan is not intended to be reduced due to the establishment of the ICN Fund.

The ICN Fund will initially be seeded with a payment of €2bn from the dissolution of the National Reserve Fund in 2024. The balance will then be drawn from future budget surpluses over time. The ICN Fund will also have a ring-fenced climate and nature component worth over €3bn, which aims to help the achievement of carbon budgets through capital projects where it is clear our climate targets are not being reached.

Legal structure

The ICN Fund is to be established under new legislation, the Future Ireland Fund and Infrastructure, Climate and Nature Fund Bill 2023. The Future Ireland Fund will operate separately as a sovereign wealth fund and will be used to provide for things like future pension provisions. This legislation is intended to be published in the coming months and will include the resourcing and drawdown criteria for each fund, as well as the governance and management structures of the funds.

Strong ring-fencing and governance provisions will be central in ensuring the funds operate as intended, to prevent the kind of infrastructure deficits we are currently seeing.

The legislation is intended to:

  • Commit to saving a portion of forecasted budgetary surpluses, such as windfall taxes, which can be invested and used to ease future expenditure pressures, including demographic pressures, climate and digital transitions and housing
  • Potentially reduce the future tax burden on taxpayers
  • Build fiscal buffers to be used in periods of economic stress and pressure on the public finances, to smoothen the investment cycle


The funds will be vested in the Minister for Finance and will be managed and invested by the NTMA in high-quality, short-term liquid instruments, in or outside of the State. The NTMA will take account of ESG considerations in the investment process, so for example, direct investment in fossil fuel undertakings will not be permitted.

Money can be drawn down from the ICN Fund after 2026 but only in part. These monies can be used to upgrade climate, tech, or other infrastructure, and can also be used as a rainy-day fund in a future downturn.

Up to 22.5% of the ICN Fund can be used in any given year after 2026 to support climate and nature-related projects if the Government is failing to meet its climate goals.

Climate related initiatives

The costs associated with reducing the risk of climate change have been highlighted as an example of one of the expected structural fiscal pressures on the horizon. The resources of the ICN Fund will, amongst other uses, help to support climate related initiatives over the medium and long term. However, it is also acknowledged that there is a need for additional investment to assist Ireland deal with the transition to climate neutrality.

In recognition of this, it is proposed that a second avenue of access to the ICN Fund, be developed, specifically related to the achievement of climate goals. It would remain a single fund with two access routes to drawing down its resources. We await further developments on how this will be reflected in the legislation to be enacted.


While the ICN Fund, assuming the economy remains strong, is not intended to be used for major projects such as MetroLink, BusConnects, and DART, it should serve to provide much-needed assurance to the market that if there is economic turbulence in the future, then the procurement and progress of such projects will continue. The ICN Fund signals that Ireland is serious about delivering on its National Development Plan and maintaining a strong pipeline of projects, in good times and in bad, which should also assist in developing a robust and competitive supply chain. The recent reductions in monthly corporation tax in Ireland further underlines that volatile tax receipts should be used for capital rather than current spending.

Next steps

The Future Ireland Fund and Infrastructure, Climate and Nature Fund Bill is included on the list of bills for publication in the Government’s autumn legislation programme. Following Government approval on 10 October, the General Scheme was published on the Department of Finance’s website on 12 October.

If you would like to discuss any of the above or the construction and infrastructure landscape in Ireland more generally, please reach out to any member of our Infrastructure team.

The content of this article is provided for information purposes only and does not constitute legal or other advice.

Share this: