National Reconstruction Fund Corporation (Investment Mandate) Direction 2026

EXPLANATORY STATEMENT

Issued by the authority of the Minister for Industry and Innovation and the Minister for Finance

National Reconstruction Fund Corporation Act 2023

Purpose and Operation

Under the National Reconstruction Fund Corporation Act 2023 (the Act), the purpose of the National Reconstruction Fund Corporation (the Corporation) is to facilitate increased flows of finance into priority areas of the Australian economy.[1] It is the Government’s intention that the Corporation will perform this role in order to transform and diversify Australian industry, create secure, well-paying jobs, and boost sovereign capability. In performing this role, the types of investment the Corporation may make includes loans, guarantees and equity.

Under the Act, the Board of the Corporation (the Board) is responsible for deciding the strategies and policies to be followed by the Corporation and ensuring the proper, efficient and effective performance of the Corporation’s functions.

The Corporation and its subsidiaries (Corporation bodies) will make individual investment decisions independently of Government. The Minister for Industry and Innovation and the Minister for Finance may issue one or more directions to the Board, under subsection 71(1) of the Act, in relation to the exercise of the Corporation’s investment powers or the performance of the Corporation’s investment functions, or both, and must issue at least one direction. Directions issued in this manner are known collectively as the Corporation’s “Investment Mandate”. The purpose of the Investment Mandate is to provide a mechanism for the Commonwealth Government to articulate its broad expectations on the functions of the Corporation and how it invests and engages with risk.

The National Reconstruction Fund Corporation (Investment Mandate) Direction 2026 (the 2026 Mandate) repeals and replaces the National Reconstruction Fund Corporation (Investment Mandate) Direction 2023. The 2026 Mandate reflects the Government’s resolve to maximise the economic and industrial benefits of the transition to net zero, strengthen domestic capabilities, and support industrial decarbonisation and modernisation. It provides new directions relating to the Economic Resilience Program, Forestry Growth Fund, and the Net Zero Fund.

The Economic Resilience Program will provide up to $1 billion in financial accommodation in the form of a loan with zero per cent interest to support Australian manufacturing and logistics businesses to respond to market disruption or to maintain and build industrial capabilities that contribute to Australia’s national interest, particularly Australia’s strategic or economic resilience.

The Forestry Growth Fund will provide up to $150 million in concessional financing to support the wood product manufacturing sectors to modernise and advance processing capabilities and increase the value of outputs, including in relation to wood products used for housing construction. This $150 million is in addition to the $500 funding target for investments in agriculture, forestry, fisheries, food and fibre from the General Portfolio.

The Net Zero Fund will provide up to $5 billion in concessional finance to support large industrial facilities to decarbonise, improve energy efficiency and transition to net zero, and for the scaling up of domestic manufacturing of renewables and low emissions technologies.

Further details about the 2026 Mandate are outlined in Attachment A.

The following statutory pre-conditions have been met in relation to the 2026 Mandate:

The responsible Ministers have had regard to the object of the Act, and any other matters they considered relevant, in preparing the 2026 Mandate.[2]
The 2026 Mandate is consistent with the Act and does not directly or indirectly require Corporation bodies to make (or not to make) any particular investment.[3]

Authority

Section 71 of the Act provides authority for the legislative instrument. Section 74 provides that the Board must take all reasonable steps to ensure that the Corporation bodies comply with the Investment Mandate, including the process in the event the Board becomes aware that the Corporation or a subsidiary has failed to comply.

Consultation

Pursuant to section 73 of the Act, the responsible Ministers consulted the Board during the preparation of the 2026 Mandate. The Board provided a submission in support of the 2026 Mandate which is tabled and publicly available.

A consultation paper on the design of the Corporation (including the Mandate) was released on 30 November 2022. Submissions were open to 3 February 2023. More than 250 submissions were received from businesses, peak bodies, financiers, unions, specialist investment vehicles (SIVs), all levels of government, and the community.

Additionally, virtual consultations were held throughout December 2022 and January 2023. More than 48 virtual consultations were conducted, and the departments engaged with more than 430 organisations and individuals through roundtables and one-on-one meetings. Consultations included engagement with business and peak industry organisations, unions, financiers, other SIVs, indigenous stakeholders, Regional Development Associations and members of the public. A Reference Group consisting of industry experts was also consulted on the key parameters.

Public consultation was also undertaken in relation to the design of the Net Zero Fund, including an online consultation process which was open from 24 September to 20 October 2025. More than 120 submissions were received from industrial manufacturing and energy sector stakeholders, unions, researchers, think tanks and representative bodies. In addition, an Industry Forum attended by 61 representatives from 57 companies, unions, think tanks, government agencies, and SIVs including the Corporation, Clean Energy Finance Corporation and the Australian Renewable Energy Agency, was convened on 14 October 2025. Information received from the submissions and the Industry Forum informed the design of the Net Zero Fund.

Targeted consultation with forestry industry stakeholders through the Strategic Forest and Renewable Materials Partnership was also undertaken in relation to the Forestry Growth Fund in February 2026. The Forestry Growth Fund will support the delivery of the Timber Fibre Strategy, which was informed by extensive consideration by the Strategic Forest and Renewable Materials Partnership and across industry.

Consultation has also occurred with relevant Commonwealth agencies, including the Department of Agriculture, Fisheries and Forestry; Department of Climate Change, Energy, the Environment and Water; Department of Finance; Department of the Prime Minister and Cabinet; Department of the Treasury; the National Indigenous Australians Agency, the Net Zero Economy Authority and the Office for Women on the design and implementation of the Economic Resilience Program, the Net Zero Fund and the Forestry Growth Fund, including through interdepartmental consultation processes. These agencies and the Corporation were also consulted in the development of the 2026 Mandate.

Attachment A

Details of the National Reconstruction Fund Corporation (Investment Mandate) Direction 2026

PART 1 – PRELIMINARY

Section 1 – Name of Instrument

This section specifies the name of the instrument as the National Reconstruction Fund Corporation (Investment Mandate) Direction 2026.

Section 42 of the Legislation Act 2003 (the Legislation Act) (which deals with the disallowance of legislative instruments) does not apply to this instrument: refer to section 44 of the Legislation Act and section 9 of the Legislation (Exemptions and Other Matters) Regulation 2015. Part 6 of the Legislation Act (which deals with the sunsetting of legislative instruments) does not apply to this instrument: refer to section 54 of the Legislation Act and section 11 of the Legislation (Exemptions and Other Matters) Regulation 2015.

It is appropriate for the 2026 Mandate to not be subject to disallowance. Making the instrument subject to disallowance would introduce significant operational uncertainty for the Corporation and would be inconsistent with like instruments for other entities, including the Clean Energy Finance Corporation (CEFC) and the Northern Australia Infrastructure Facility (NAIF).

Section 2 – Commencement

Section 2 provides that the provisions set out in the 2026 Mandate commence on the day after it is registered on the Federal Register of Legislation.

Section 3 – Authority

Section 3 provides that the 2026 Mandate is made under subsection 71(1) of the Act.

Section 4 – Schedules

Section 4 provides that this instrument amends or repeals specified legislative instruments as set out in the applicable items in the Schedule. Any other items in the Schedule operate according to their terms.

Section 5 – Object

Section 5 sets out that the object of the instrument is to ensure that the Board performs the Corporation’s investment functions and exercises the Corporation’s investment powers. With respect to the General Portfolio, Net Zero Fund, and Forestry Growth Fund - concessional finance, in a commercial manner to deliver a positive return to the Australian Government over time. By requiring it to operate in this way, the Corporation will need to invest responsibly and manage risk such that it is financially self-sufficient and achieves the relevant benchmark returns (see sections 17, 19 and 20 of the 2026 Mandate). As the Corporation will not award grants, the Corporation’s investments must be made with an expectation of financial returns.

With respect to the Economic Resilience Program, in a responsible manner to deliver a positive return contributing to Australia’s strategic or economic resilience, and so as to invest to support, diversify and transform Australia’s industry and economy.

The Economic Resilience Program will not make returns above payment of the loan amount (see section 18). It is instead important that investments focus on non-financial returns by making investments which aim to support the objectives of the Economic Resilience Program and broader government objectives.

Section 6 – Simplified outline of this instrument

The simplified outline of the 2026 Mandate is included to assist readers in understanding the substantive provisions. It is not intended to be comprehensive and readers should rely on the substantive provisions.

Section 7 – Definitions

This section provides definitions of terms used in the instrument. Although these definitions are largely self-explanatory, the following points should be noted in particular:

“Investment practices” is defined in the 2026 Mandate and used in this Explanatory Statement to mean the exercise of the Corporation’s investment powers and performance of the Corporation’s investment functions.
General Portfolio is defined in the 2026 Mandate and used in this Explanatory Statement to mean all of the investments of all Corporation bodies at that time, other than those made under the Economic Resilience Program, the Forestry Growth Fund - concessional finance, and the Net Zero Fund.
The Economic Resilience Program, Forestry Growth Fund, and Net Zero Fund are also defined in the 2026 Mandate and used in this Explanatory Statement to mean all the investments made under those Programs/Funds.

Market disruption may include significant external shocks or structural changes—such as tariffs, geopolitical events, or supply‑chain failures—that materially undermines strategically important Australian industries and cannot be effectively addressed by the market without targeted government intervention such as an investment. Further terms used in this Explanatory Statement are explained in footnotes where appropriate.

PART 2 – DIRECTIONS

Division 2.1 - General Provisions

Section 8 – Introduction

Section 8 provides an introduction to Part 2, setting out the Government’s broad expectations regarding how the Corporation should interpret the directions that follow in this part of the 2026 Mandate. Section 8 is not a direction. It sets out that the Corporation is expected to help attract additional private finance and investment in the priority areas[4] in order to transform and diversify Australian industry, and to improve the competitiveness of Australian businesses across the domestic industry value chain.[5]

In line with its policy intent, the Corporation is expected to have regard to public policy outcomes when considering investments, which means taking into account the Investment Considerations listed in section 9 of the 2026 Mandate, and subsections 17 (3A) and (4) of the Act. Similarly, the objectives of the Sub-funds should be taken into account when making investments.

Section 9 – Investment considerations

Section 9 sets out the considerations the Corporation must take into account when carrying out its investment practices.

Subsection 9(1) provides that the Corporation must have regard to the matters set out in subsection 17(3A) of the Act, namely:

the desirability of transforming Australia’s industry and economy by:

growing or improving Australia’s industrial capability[6]; or
improving Australian industry’s ability to pursue value-adding opportunities[7]; or
supporting a long-term improvement in Australia’s economic diversity; and

the desirability of attracting private sector finance or investments into the priority areas of the Australian economy; and
Australia’s greenhouse gas emissions reduction targets and the desirability of supporting decarbonisation; and
the desirability of creating secure jobs and a skilled and adaptable workforce; and
the desirability of enhancing Australia’s resilience against supply chain vulnerabilities; and
the desirability of encouraging the commercialisation of Australian innovation and technology.

Subsection 9(1) also refers to subsection 17(4) of the Act, providing that the Corporation must have regard to the desirability of encouraging and improving economic participation by historically underrepresented groups, including:

women; and
First Nations Australians; and
people with a disability; and
people of culturally and linguistically diverse backgrounds.

Subsection 9(1) further provides that the Corporation must also have regard to the desirability of investments to help support sustainability and circular economy principles and solutions, and regional development. The Corporation must also have regard to national security. These terms are understood as follows:

Circular economy

The intention underlying subparagraph 9(1)(b)(i) is to ensure that, in considering its investment activities, the Corporation seek to strengthen Australia’s circular manufacturing capabilities, focusing on:

Resource efficiency, for example, by supporting projects that design and manufacture products that can be reused, recycled or reprocessed at their end of use and/or those that avoid the creation of waste and pollution.
Resource circularity, for example, by supporting projects that use recycled content in manufacturing (including from advanced and organic recycling processes).
Resource productivity, for example, by supporting projects that do more with less virgin materials and energy inputs.
Resource regeneration, for example, by supporting projects that substitute materials and processes that harm the environment, with regenerative resources.

Regional development

Regional development, as used in subparagraph 9(1)(b)(ii), is intended to refer to activities that have the potential to support the long-term economic development of Australia’s regions and reduce economic disparities between regions and cities.

The intention underlying subparagraph 9(1)(b)(ii) is to ensure that, in considering its investment activities, the Corporation has regard to the Government’s broader approach to regional investment, which places regions and their people at the centre of decision-making, ensuring investments are locally informed, supported, and draw on a region’s unique strengths.

The intention additionally is that the Corporation consider the broader social and economic context of a region and the potential impacts of its investments (to inform this, the Corporation should where possible, consider measuring their impacts). This includes considering interactions with other public or private investments or activities in the region when evaluating investment proposals. Where appropriate, the Corporation should seek to consult with relevant State, Territory or Commonwealth government agencies, to ensure its investments complement existing public or private investment activities in the region (see also sections 10 and 11 of the 2026 Mandate).

National security

The Corporation’s investment activity could provide financing to an entity which produces technologies, products or services that could be used for purposes that are contrary to Australia’s national security interests. For this reason, in considering its investment activities, the Corporation must also have regard to national security, for example by conducting national security assessments as part of its risk management processes. The Corporation may also have regard to positive outcomes on national security from a particular investment.

Communities, regions and workers impacted by net zero transition

Subsection 9(2) additionally provides that the Corporation must also have regard to the desirability of investments to help support communities, regions, industries and workers that are, or will be, significantly affected by Australia’s transition to a net zero emissions economy when performing the Corporation’s investment functions or exercising the Corporation’s investment powers in relation to investments under the Net Zero Fund and the Economic Resilience Program.

The net zero transition is expected to result in structural economic change, with impacts that may be concentrated in particular regions, industries and workforces. This provision ensures that, in making investment decisions under the Net Zero Fund and the Economic Resilience Program, the Corporation must take into account the broader transition context and the potential contribution of investments to economic adjustment and resilience.

Section 10 – Corporation must take medium- to long-term outlook

Subsection 10(1) directs the Corporation to take a medium- to long-term outlook in relation to its investment practices. This ensures the Corporation has the flexibility to offer patient capital to meet its policy objectives. This provision should not be interpreted as preventing the Corporation from providing short-term investments, or a series of several short-term investments to deliver long-term outcomes.

Further, to ensure that the Corporation does not unduly displace alternative private sector support where such support is present or emerges, subsection 10(2) preserves the Corporation’s ability to take short-term actions to make or realise investments, for example, where the private market is able to take over the financing and where this is consistent with the Act and the 2026 Mandate. For example, in the case of equity investments, the Corporation may seek to realise investments if it is appropriate to do so and where the private sector can take over in a manner that aligns with the Corporation’s objectives.

Section 11 – Corporation not to damage Commonwealth’s reputation

Section 11 provides that the Corporation has a responsibility not to act in a way that is likely to cause damage to the Commonwealth’s reputation.

Section 12 – Corporation must collaborate and cooperate

Section 12 directs the Corporation to cooperate and collaborate with other Commonwealth, State or Territory entities that are also able to support investments in the priority areas (for example, but not limited to, the Net Zero Economy Authority, CEFC, NAIF and Export Finance Australia (EFA)) to minimise potential overlap or duplication and coordinate co-investment where appropriate, and to consider opportunities (including under subsection 12(4) in relation to the transition to net zero emissions).

The Corporation may invest alongside other SIVs where appropriate, and subsection 12(2) provides a non-exhaustive list of relevant agencies.

Subsection 12(3) defines a State and Territory entity to mean a State or Territory, or a body corporate established for a public purpose by or under a law of a State or Territory.

Subsection 12(4) specifies that where the Net Zero Economy Authority has engaged with the Corporation on opportunities that support the transition to net zero emissions, the Corporation will consider those opportunities.

Section 13 – Limits on equity investments

Section 13 provides that the Corporation must not, whether individually or alongside other Commonwealth entities, take a controlling equity stake in any entity.

Subsection 13(1) sets out that Corporation bodies must not acquire an equity interest in an entity if it would result in Corporation bodies and any other Commonwealth entities together holding a majority of equity interests in the entity or being in the position to control the entity.

Under subsections 13(2) and (3), where a Corporation body holds an equity interest in an entity and becomes aware that this interest would breach subsection 13(1), it must take steps to realise sufficient equity interests to rectify the situation as soon as is reasonably practicable after becoming aware of the fact.

Subsection 13(4) provides that “control” in this section has the same meaning as in the definition of “subsidiary” in the Public Governance, Performance and Accountability Act 2013, which defines it as having the same meaning “as in the accounting standard that applies for the purpose of deciding whether a company has to prepare consolidated financial statements under the Corporations Act 2001”.

Section 14 – Limits on guarantees

Section 14 sets out limits on guarantees provided by the Corporation.

Guarantees include any form of monetary commitment supporting the performance of an obligation. Under the Australian Government reporting framework, guarantees are to be accounted for in accordance with the Australian Accounting Standards.

Guarantees pose a particular risk to the Corporation’s balance sheet and can have unexpected consequences when called. As such, section 14 provides that the Corporation should not give guarantees unless this is the most appropriate way of achieving particular public policy outcomes.[8]

Section 14 further requires the Corporation to ensure that any guarantee that it does give is appropriately limited and quantifiable, and that where guarantees are used the total value of these guarantees does not exceed 5 per cent of the total amount that has been credited to the Corporation’s Special Account.[9]

Section 15 – Australian industry participation

Subsection 15(1) outlines the application of Commonwealth Australian Industry Participation (CAIP) Plans to the Corporation’s investment activities. The application of CAIP Plans to investments made by the Corporation is aimed at increasing opportunities for capable and competitive Australian and New Zealand small and medium sized enterprises to participate in major projects where government investment is equal to or exceeds $20 million (GST inclusive).

A CAIP Plan details how a project proponent will provide full, fair and reasonable opportunity to Australian industry to participate in a project. This applies to any subcontracting or purchasing opportunities that may be available. CAIP Plans do not mandate the use of Australian industry but rather aim to provide Australian industry with the opportunity to demonstrate their capabilities and capacity.[10]

It is anticipated that prior to contract execution with a loan recipient, the Corporation should engage with the team responsible for CAIP policy to determine whether a full CAIP plan would likely increase opportunities for Australian Businesses.

If required, the Corporation may engage with the team responsible for CAIP policy for guidance on standard contract terms to include in funding agreements that assist recipients in their CAIP obligations.

Subsection 15(2) directs the Corporation to consult with the Department of Finance regarding the application of the Australian Government’s Buy Australian Plan. The Buy Australian Plan is intended to improve the way government contracts work and builds domestic industry capability through the Australian Government’s purchasing power.

In respect of the Buy Australian Plan, the Corporation must consult with the Department of Finance on relevant investment policies or strategies, rather than specific decisions or issues in relation to particular investments or non-investment matters.

Section 16 – Providing information to the Ministers

Subsection 16(1) allows the Minister for Industry and Innovation and the Minister for Finance, as the responsible Ministers for the Corporation, to request information from the Corporation on an ad hoc basis in relation to the performance of the Corporation’s investment functions and/or the exercise of the Corporation’s investment powers.

Subsection 16(2) requires the Corporation to respond to that request for information within 30 days. The Corporation must provide its response to both responsible Ministers.

Subsection 16(3) requires the Corporation, within one month after the end of each quarter unless otherwise requested, to provide the responsible Ministers with a quarterly briefing about the performance of the Corporation’s investment functions and the exercise of the Corporation’s investment powers in a form approved by the Ministers. The briefing can include information such as the status of its pre-investment decision pipeline and each investment’s performance against any key metrics requested by the Minister (for example investment stage, state, priority area, form of finance, general portfolio/sub-fund, investment amount, drawn amount, amount repaid (for loans)), and progress against forecast public policy outcomes. Certain information would be subject to commercial in confidence arrangements. The form approved by the Minister will provide more detail on the information required in the Corporation’s briefing.

Division 2.2 –General Portfolio

Section 17 –General Portfolio

Section 17 provides direction and investment settings in relation to the Corporation’s General Portfolio, including in relation to targeted financing levels, limits on concessional finance accommodation, benchmark return, risk level and impacts of investment practices.

Targeted financing levels

Subsection 17(1) requires the Corporation to target certain financing levels over the medium- to long-term for the General Portfolio:

Medical manufacturing: $1.5 billion
Value adding in resources: $1 billion
Critical technologies in the national interest: $1 billion
Advanced manufacturing: $1 billion
Agriculture, forestry, fisheries, food and fibre: $500 million

It does not require the Corporation to manage separate sub-funds for each of the identified areas. It is, however, the Government’s expectation that the Corporation report its progress against these target financing levels as part of its regular reporting.

If, over the medium- to long-term, the Corporation becomes aware that it is falling short of any one of these target financing levels, it should seek to prioritise its investments going forward such that these levels are met within a reasonable and practicable period of time.

The identified areas in which the Corporation is to target these financing levels do not correspond exactly with the priority areas of the Australian economy specified in the Declaration. As such, this section notes that investments in a single priority area may be counted towards any other appropriate target or targets set out in this section.

To determine which types of technology qualify as ‘critical’, the Corporation may refer to the Government’s most recent List of Critical Technologies in the National Interest as relevant at the time of investment. Further details are available at: https://www.industry.gov.au/publications/action-plan-critical-technologies/list-critical-technologies-national-interest.

This subsection is not intended to override other provisions of the Investment Mandate. In targeting these funding levels, the Corporation must still perform its investment functions and exercise its investment powers in accordance with the Act.

Limits on concessional financial accommodation

The Corporation is able to use a wide range of investment tools to facilitate flows of finance into the priority areas of the Australian economy.[11] This includes providing commercial and concessional finance where necessary to deliver on the Corporation’s policy intent. Concessional finance is provided on more favourable terms than the borrower could obtain in the private market. For debt investments, concessions may be provided in many forms, for example, but not limited to, lower than market interest rates, longer loan tenors, subordinated positions, income contingent repayment terms, or additional/longer or more flexible grace periods before the payment of the principal and/or interest is due. For equity investments, concessions may include, but not be limited to, different classes of shares and lower equity internal rate of return.

Subsection 17(2) provides that the Corporation must not provide financial accommodation on concessional terms in relation to investments under the General Portfolio unless it is satisfied that (a) this is the most appropriate way of achieving particular policy outcomes,[12] (b) based on a reasonable qualitative assessment, the level of concessionality is commensurate with the anticipated economic benefits and public policy outcomes, and (c) the concessionality provided is the minimum that would both achieve those benefits and outcomes and allow the investment proposal to proceed.

Concessionality reflects the mark-to-market valuation of loans made that financial year and should be measured as the difference between the present value of each loan at market rates and the present value of each loan at the given concessional rate.

Benchmark return

Subsection 17(3) sets out the Corporation’s benchmark rate of return for the General Portfolio.

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 Corporation’s General Portfolio over the medium- to long-term.

The Australian Government bond rate is to be calculated from individual reference rates using the five-year Australian Government bond rate[13] applicable at the time of each investment, and weighting the portfolio for the timing and relative to the quantum of each individual investment.

Subsection 17(4) provides that performance against the benchmark return will be measured after deducting credit losses but before deducting the Corporation's operating expenses (those not directly related to making investments) and will be published in the Corporation’s annual report. The Corporation will follow the Australian Accounting Standards where applicable in calculating and measuring its return (for example, in particular, AASB 9 Financial Instruments).

The benchmark return target is expected to be earned across the portfolio of investments over the medium- to long-term. Individual investments could be made with expected individual returns above or below (using the concessionality principles set out in Section 17(2) of the 2026 Mandate) the benchmark return.

Proponents should not expect to be able to access financing from the Corporation at the benchmark return. The Corporation is required to apply commercial rigour in assessing all investments. The actual return the Corporation seeks for any given investment will be a risk-adjusted return reflecting the individual characteristics of specific projects, the need to cover the operating expenses of the Corporation, and the requirement to target the benchmark return on a portfolio basis, in addition to the desired public policy outcomes.[14]

The Government is committed to driving the transformation and diversification of Australia’s industry and economy over the long term. The 2026 Mandate therefore establishes medium- to long-term portfolio performance measures with the intention to conduct a review of the benchmark return three years after commencement of the 2026 Mandate to ensure it is appropriate.

Risk level

Subsections 17(5) to 17(7) sets out the Corporation’s risk level in relation to the General Portfolio.

Paragraph 17(5)(a) provides that in targeting the General Portfolio benchmark return, the Corporation must operate with a commercial approach. This includes but is not limited to undertaking appropriate due diligence and credit and investment risk assessment processes.

Paragraph 17(5)(b) further provides that the Corporation must also seek to develop a General Portfolio that is sufficiently diversified and has an acceptable but not excessive level of risk.

Further to paragraph 17(5)(b), subsection 17(6) provides that the level of risk deemed acceptable by the Corporation may be higher than the risk tolerance of commercial banks and private sector investors, if this higher risk tolerance supports the objects of the Act and the 2026 Mandate. In particular, the Government has directed the Corporation to make investments that diversify and transform Australia’s industry and economy. This focus may increase the Corporation’s exposure to credit risk as transformative activities may have a higher risk profile than established, business-as-usual activities and therefore the overall level of risk in the Corporation’s portfolio may increase.

Further to subsection 17(5) and subsection 17(6), subsection 17(7) provides that the Corporation may take on higher risk (when compared to the risk that it would normally consider acceptable for other investments) for investments in emerging technologies and industries, investments that support Australia’s strategic interests (e.g. investments in support of Australia’s national security, sovereign capability or supply chain resilience), or projects with longer term payback periods.

When considering the General Portfolio risk outlined in the 2026 Mandate, the Corporation will make a range of investments, including those aimed at transforming Australia’s industry and economy. Some of these investments will be in emerging technologies and technically complex projects that carry higher risk than what the market might typically accept. Consequently, in practice this will involve some short-term volatility in the Corporation’s returns, including losses or provisions in some projects and the possibility of losses in some years where there is significantly worse asset performance than expected. This includes potential losses in the early years, which in part reflects why the Corporation’s General Portfolio benchmark return is measured over the medium- to long-term.

In recognition of any volatility in the Corporation’s returns, subsection 17(8) sets out the Government’s direction that the Corporation will periodically review its investment and operational practices for the purposes of managing the risk of the General Portfolio over time.

Impact of Corporation’s investment practices

Subsection 17(9) provides that investments of the Corporation under the General Portfolio should consider the potential effect of its investments on other market participants and the efficient operation of the Australian financial market.

In relation to investments under the General Portfolio, the Corporation should also, as far as is reasonably practicable, avoid competing with private sector investment where such investment is present, or competing with other Commonwealth, State or Territory entities that are also able to, or already do, support investments in the priority areas of the Australian economy as specified in the Declaration. Instead, it is intended that the Corporation complement and attract additional private investment and complement (not duplicate) public sector investment, including investment through existing Australian Government SIVs such as the CEFC, NAIF, Regional Investment Corporation and EFA. For example, the Corporation should not seek to refinance existing debt held by other SIVs at a lower rate where it is not required.

Division 2.3 – Sub-funds

The Corporation is also responsible for investments under three Sub-funds: the Economic Resilience Program, the Forestry Growth Fund, and the Net Zero Fund. These Sub‑funds are established as distinct from the Corporation’s General Portfolio, with their own objectives, risk and return settings.

Section 18 – Economic Resilience Program

Section 18 provides direction and investment settings for the Economic Resilience Program. It establishes the Corporation as the financing arm of the Government’s Economic Resilience Program commitment. The Corporation will make investments in a manner consistent with the broader Economic Resilience Program objectives.

The Economic Resilience Program is a commitment of up to $1 billion in financial accommodation in the form of a loan with zero per cent interest to support manufacturing or logistics businesses respond to market disruptions, such as tariffs, geopolitical events, or supply‑chain failures, or maintain and build industrial capabilities that contribute to Australia’s national interests, particularly Australia’s strategic or economic resilience.

The Economic Resilience Program is intended to minimise the impacts of market disruption on the Australian economy through timely provision of financial accommodation to businesses in industries most exposed to the disruption, and strengthen Australia’s industrial base in response to increasing global economic volatility.

Loans are targeted at financing manufacturing or logistics businesses affected by market disruption if they fall within any of the priority areas of the Australian economy as specified in the Declaration. This includes addressing immediate financial constraints for critical supply chain businesses including but not limited to fertiliser, fuel and plastics, and increases in operating capacity and output.

Investments made under the Economic Resilience Program could include consideration of the global and domestic concentration of supply and supply chains; the vulnerability of supply to disruption; how critical the industry or product is to our security and resilience; and whether the industry can prevent, absorb, adapt or transform processes to limit the consequences of a shock to our national interests.

Industrial capabilities in the national interest include capabilities which contribute to Australia’s strategic or economic resilience, including sectors where some level of domestic capability is a necessary or efficient way to protect the economic resilience and security of Australia, and the private sector will not deliver the necessary investment in the absence of government support. This will likely reduce the Corporation’s ability to crowd in finance under the Economic Resilience Program. However, the Corporation must still have regard to other investment considerations.

The Economic Resilience Program recognises that ongoing instability and fragmented supply chains place critical Australian industries at risk. Without targeted intervention, businesses essential to sovereign capacity and secure supply chains may scale back or exit the market, weakening Australia’s economic resilience and ability to respond to future and compounding shocks.

Through targeted investments, the Economic Resilience Program enables the Corporation to support manufacturers and logistics businesses facing geopolitical and structural pressures. The Economic Resilience Program aims to stabilise and strengthen domestic capability, safeguard employment, and position Australia as a competitive and reliable partner in diversified and resilient global supply chains.

Subsection 18(1) requires the Corporation to make available, for Economic Resilience Program purposes, $1 billion, from within the Corporation’s existing $15 billion allocation to support Australian manufacturing and logistics businesses affected by market disruption or to maintain and build industrial capabilities that contribute to Australia’s national interest, particularly Australia’s strategic or economic resilience. Due to the operation of section 63 of the Act, financial accommodation may only be provided for purposes relating to any of the priority areas of the Australian economy.

Paragraph 18(1)(a) is intended to assist manufacturing businesses that have been impacted by a significant external shock or structural change—such as tariffs, geopolitical events, or supply‑chain failures—that materially undermines strategically important Australian industries and cannot be effectively addressed by the market without targeted government investment intervention.

Any funding applied to the Economic Resilience Program (including loan repayments) and any returns generated by investments under the Economic Resilience Program are to be returned to the Corporation’s General Portfolio as they are received and may be applied by the Corporation for investments under the General Portfolio. The Economic Resilience Program will cease once funds are expended.

Subsection 18(2) specifies that financing under the Economic Resilience Program must be a financial accommodation in the form of a loan with zero per cent interest. Given that investments under the program involve the provision of zero interest loans, there is no benchmark rate of return for the Economic Resilience Program.

The Corporation, in relation to all investments made for the purposes of the Economic Resilience Program, may deploy the amount of concessionality it deems required in order to achieve the Government’s objectives in respect of the Economic Resilience Program policy as outlined in subsection 18(1).

Risk level

Subsections 18(3) to 18(5) sets out the Corporation’s risk level in relation to the Economic Resilience Program.

Paragraph 18(3)(a) provides that in relation to investments made under the Economic Resilience Program, the Corporation must undertake appropriate due diligence and credit and investment risk assessment processes.

Paragraph 18(3)(b) further provides that the Corporation must also seek to develop a portfolio of investments under the Economic Resilience Program that is sufficiently diversified and has, in aggregate, an acceptable level of risk (having regard to the terms of the Act and the objectives of the Program identified in subsection 18(1)).

Paragraph 18(3)(c) provides that the Corporation may make investments under the Economic Resilience Program where the level of risk deemed acceptable by the Corporation is higher than for the General Portfolio when there are viable opportunities to do so, provided those investments support the policy objectives of the Economic Resilience Program and to do so would be consistent with the Act and the 2026 Mandate. This may include a risk of capital losses or a fall in an investment’s value. This is because Economic Resilience Program investments may increase the Corporation’s overall exposure to risk as the scale, concentration and nature of these investments may have a higher risk profile.

Further to subsection 18(3), subsection 18(4) provides that the level of risk deemed acceptable by the Corporation may be higher than the risk tolerance of commercial banks and private sector investors, if this higher risk tolerance supports the objects of the Act and the 2026 Mandate.

Subsection 18(5) sets out that the Corporation will periodically review its investment and operational practices for the purposes of managing the risk of the Economic Resilience Program over time.

Section 19 – Forestry Growth Fund

Section 19 provides direction and investment settings for the concessional financing element of the Forestry Growth Fund. It establishes the Corporation as the financing arm of the concessional component of the Government’s Forestry Growth Fund commitment. The concessional element of the fund will make investments in a manner that is consistent with the Forestry Growth Fund objectives.

The Forestry Growth Fund is a commitment of up to $300 million, including $150 million in concessional finance to support the modernisation of the wood product manufacturing sectors and to increase the value of Australian made timber manufacturing outputs, including in relation to wood products used for housing construction. This includes developing competitive timber manufacturing capability in mass timber, engineered wood and high-value secondary processing and component manufacture.

The need to build Australia’s wood product manufacturing scale, depth and resilience is highlighted in the Strategic Forest and Renewable Materials Partnership’s 2025 advice to the Australian Government, known as the Timber Fibre Strategy.

The Timber Fibre Strategy identifies that to make a greater contribution to achieving national goals, particularly improving Net Zero by 2050 and new housing supply outcomes, the wood product industry needs Australian Government support to build confidence in the future of domestic timber processing and construction materials markets.

The Forestry Growth Fund will be available to support advanced manufacturing investments at new and existing Australian wood product processors (including mills and manufacturers). It will accelerate transformative investment to modernise and advance processing capabilities to diversify value-added product offerings (made from logs, pulplogs, residues and recycled timbers), including projects linked to prefabrication and manufactured housing.

Subsection 19(1) requires the Corporation to make available, for Forestry Growth Fund purposes, $150 million, from within the Corporation’s existing $15 billion allocation, to support the wood product manufacturing sectors modernise and advance processing capabilities, including new facilities, and to increase the value of outputs, including with respect to wood products used for housing construction. This $150 million is in addition to the existing $500 million target financing level for the agriculture, forestry, fisheries, food and fibre sectors specified for the General Portfolio at subsection 17(1).

Due to the operation of section 63 of the Act, financial accommodation may only be provided for purposes relating to any of the priority areas of the Australian economy and equity interests may only be acquired where any of the entity’s activities are in a priority area of the Australian economy.

The Corporation, in relation to all investments made for the purposes of the Forestry Growth Fund, may deploy the amount of concessionality it deems necessary in order to achieve the Government’s objectives in respect of the Forestry Growth Fund policy as outlined in subsection 19(1).

Benchmark return

Subsection 19(2) sets out the Corporation’s benchmark rate of return for the Forestry Growth Fund – concessional finance. The Corporation must target an average return of 1 per cent below the five‑year Australian government bond rate (according to the size and time of investing) as the benchmark return of investments made under the Forestry Growth Fund over the medium- to long-term.

The Australian Government bond rate is to be calculated from individual reference rates using the five-year Australian Government bond rate[15] applicable at the time of each investment, and weighting the portfolio for the timing and relative to the quantum of each individual investment.

Subsection 19(3) provides that performance against the benchmark return for the Forestry Growth Fund will be measured after deducting credit losses but before deducting the Corporation's operating expenses (those not directly related to making investments) and will be published in the Corporation’s annual report. The Corporation will follow the Australian Accounting Standards where applicable in calculating and measuring its return (for example, in particular, AASB 9 Financial Instruments).

The benchmark return target for the Forestry Growth Fund is expected to be earned across the portfolio of investments for the Forestry Growth Fund over the medium- to long-term. Individual investments could be made with expected individual returns above or below the benchmark return for the Forestry Growth Fund.

Proponents should not expect to be able to access financing from the Corporation at the benchmark return for the Forestry Growth Fund. The Corporation is required to apply commercial rigour in assessing all investments. The actual return the Corporation seeks for any given investment will be a risk-adjusted return reflecting the individual characteristics of specific projects, the need to cover the operating expenses of the Corporation, and the requirement to target the benchmark return on a portfolio basis, in addition to the desired public policy outcomes[16].

Any funding applied to the Forestry Growth Fund including returns generated (and capital committed) by the Forestry Growth Fund are to be returned to the Corporation’s General Portfolio as they are received and may be applied by the Corporation for investments under the General Portfolio. The Forestry Growth Fund will cease once funds are expended.

Risk level

Subsections 19(4) to 19(6) sets out the Corporation’s risk level in relation to the Forestry Growth Fund – concessional finance.

Paragraph 19(4)(a) provides that in targeting the Forestry Growth Fund benchmark return, the Corporation must operate with a commercial approach. This includes but is not limited to undertaking appropriate due diligence and credit and investment risk assessment processes.

Paragraph 19(4)(b) further provides that the Corporation must also seek to develop a portfolio of investments under the Forestry Growth Fund that is sufficiently diversified and has, in aggregate, an acceptable level of risk (having regard to the terms of the Act and the objectives of the Fund as identified in subsection 19(1)).

Paragraph 19(4)(c) provides that the Corporation may make investments under the Forestry Growth Fund where the level of risk deemed acceptable by the Corporation is higher than for the General Portfolio when there are viable opportunities to do so, provided those investments support the policy objectives of the Forestry Growth Fund and to do so would be consistent with the Act and the 2026 Mandate. This may include a risk of capital losses or a fall in an investment’s value. This is because Forestry Growth Fund investments may increase the Corporation’s overall exposure to risk as the scale, concentration and nature of these investments may have a higher risk profile.

Further to subsection 19(4), subsection 19(5) provides that the level of risk deemed acceptable by the Corporation may be higher than the risk tolerance of commercial banks and private sector investors, if this higher risk tolerance supports the objects of the Act and this instrument.

Subsection 19(6) sets out that the Corporation will periodically review its investment and operational practices for the purposes of managing the risk of the Forestry Growth Fund over time.

Section 20 – Net Zero Fund

Section 20 provides direction and investment settings for the Net Zero Fund. It establishes the Corporation as the financing arm of the Government’s Net Zero Fund commitment. The fund will make investments in a manner that is consistent with the broader Net Zero Fund objectives.

The Net Zero Fund is a commitment of up to $5 billion to support large industrial facilities to decarbonise, improve energy efficiency, and transition to net zero, while also scaling up domestic manufacturing of renewables and low emissions technologies.

It is intended to assist Australia’s transition to net zero emissions by providing finance to:

large industrial facilities seeking to decarbonise, or
to domestic manufacturers of renewable and low emissions technologies.

The Net Zero Fund is designed to support investments in sectors that have the greatest opportunity and need for decarbonisation, and those most impacted by the economy’s transition in a net zero economy; and where public investment is likely needed for the sector to make a significant contribution to emissions reduction at an efficient cost.

The Net Zero Fund aims to accelerate emissions reduction in industries critical to achieving Australia’s net zero emissions target by 2050. It supports the Government's Net Zero Industry Sector Plan, and associated Industry Sector Plan, published in 2025. The Industry Sector Plan identifies the subsectors that represent the greatest opportunity and need for decarbonisation, and those most impacted by the economy’s transition. Further details are available at: https://www.industry.gov.au/publications/industry-sector-plan.

The Net Zero Fund addresses financial and structural barriers to industrial decarbonisation, particularly for energy‑intensive and hard‑to‑abate sectors facing high upfront capital costs and competitive pressures. By providing concessional and patient finance, the Net Zero Fund can support pilot projects, first-of-a-kind and commercial‑scale investments that support the decarbonisation of existing industrial activities.

The Net Zero Fund also provides investment for the scaling of domestic renewable and low emissions technology manufacturing. This includes the financing of first-of-a-kind projects for the domestic manufacture of renewable and low emissions technologies. This will strengthen and scale Australia’s clean energy capability, secure energy infrastructure supply chains, and deliver regional economic and employment benefits. The Net Zero Fund complements other Government initiatives supporting the net zero transition, including the Clean Energy Finance Corporation’s activities.

Paragraph 20(1)(a) requires the Board to make available, for Net Zero Fund purposes, $5 billion, from within the Corporation’s existing $15 billion allocation, to support large industrial facilities to decarbonise, improve energy efficiency, and transition to net zero, or the scaling up of domestic manufacturing of renewables and low emissions technologies. Paragraph 20(1)(b) requires that investments under the Net Zero Fund relate to either the renewables and low-emissions technologies priority area, or to the industrial manufacturing and critical supply chains priority area, as specified in the Declaration.

The Corporation, in relation to all investments made for the purposes of the Net Zero Fund, may deploy the amount of concessionality it deems necessary in order to achieve the Government’s objectives in respect of the Net Zero Fund policy as outlined in subsection 20(1).

Benchmark return

Subsection 20(2) sets out the Corporation’s benchmark rate of return for the Net Zero Fund. The Corporation must target an average return of 1 per cent below the five‑year Australian government bond rate (according to the size and time of investing) as the benchmark return of investments made under the Net Zero Fund over the medium- to long-term.

The Australian Government bond rate is to be calculated from individual reference rates using the five-year Australian Government bond rate[17] applicable at the time of each investment, and weighting the portfolio for the timing and relative to the quantum of each individual investment.

Subsection 20(3) provides that performance against the benchmark return for the Net Zero Fund will be measured after deducting credit losses but before deducting the Corporation's operating expenses (those not directly related to making investments) and will be published in the Corporation’s annual report. The Corporation will follow the Australian Accounting Standards where applicable in calculating and measuring its return (for example, in particular, AASB 9 Financial Instruments).

The benchmark return target for the Net Zero Fund is expected to be earned across the portfolio of investments for the Net Zero Fund over the medium- to long-term. Individual investments could be made with expected individual returns above or below the benchmark return for the Net Zero Fund.

Proponents should not expect to be able to access financing from the Corporation at the benchmark return for the Net Zero Fund. The Corporation is required to apply commercial rigour in assessing all investments. The actual return the Corporation seeks for any given investment will be a risk-adjusted return reflecting the individual characteristics of specific projects, the need to cover the operating expenses of the Corporation, and the requirement to target the benchmark return on a portfolio basis, in addition to the desired public policy outcomes[18].

Any funding applied to the Net Zero Fund including returns generated and capital committed) by the Net Zero Fund are to be returned to the Corporation’s General Portfolio as they are received and may be applied by the Corporation for investments under the General Portfolio. The Net Zero Fund will cease once funds are expended.”

Risk level

Subsections 20(4) to 20(6) sets out the Corporation’s risk level in relation to the Net Zero Fund.

Paragraph 20(4)(a) provides that in targeting the Net Zero Fund benchmark return, the Corporation must operate with a commercial approach. This includes but is not limited to undertaking appropriate due diligence and credit and investment risk assessment processes.

Paragraph 20(4)(b) further provides that the Corporation must also seek to develop a portfolio of investments under the Net Zero Fund that is sufficiently diversified and has, in aggregate, an acceptable level of risk (having regard to the terms of the Act and the objectives of the Fund as identified in subsection 20(1)).

Paragraph 20(4)(c) provides that the Corporation may make investments under the Net Zero Fund where the level of risk deemed acceptable is higher than for the General Portfolio when there are viable opportunities to do so, provided those investments support the policy objectives of the Net Zero Fund and to do so would be consistent with the Act and the 2026 Mandate. This may include a risk of capital losses or a fall in an investment’s value. This is because Net Zero Fund investments may increase the Corporation’s overall exposure to risk as the scale, concentration and nature of these investments may have a higher risk profile.

Further to subsection 20(4), subsection 20(5) provides that the level of risk deemed acceptable by the Corporation may be higher than the risk tolerance of commercial banks and private sector investors, if this higher risk tolerance supports the objects of the Act and the 2026 Mandate.

Subsection 20(6) sets out that the Corporation will periodically review its investment and operational practices for the purposes of managing the risk of the Net Zero Fund over time.

Section 21 - Sub-fund Accounting

The monetary amounts specified for each Sub‑fund do not limit the Corporation’s ability to invest in assets within the scope of the relevant Sub‑fund. However, only investments made up to the specified amount for a Sub‑fund will benefit from that Sub‑fund’s applicable benchmark rate of return and risk‑level arrangements.

Schedule 1 – Repeals

Schedule 1 provides that the 2026 Mandate repeals and replaces the National Reconstruction Fund Corporation (Investment Mandate) Declaration 2023. The power to repeal a previous Investment Mandate is implied in the power of the responsible Ministers under subsection 71(1) of the Act to issue Investment Mandates to the Board.

[1] As prescribed by the National Reconstruction Fund Corporation (Priority Areas) Declaration 2026 (the Declaration).

[2] See subsection 71(2) of the Act.

[3] See section 72 of the Act.

[4] As declared in the Declaration.

[5] The “industry value chain” takes into account all steps from pre- through to post-production at which value can be added, including research and development (R&D), design, logistics, production, distribution, sales and services.

[6] “Grow” in this context is taken to mean growing both new and existing industrial capabilities.

[7] “Value-adding opportunities” are taken to mean opportunities to improve competitiveness based on additional value offered to the consumer, rather than low cost alone, across the entire industry value chain from pre- through to post-production (see also footnote 5 in reference to “industry value chain”).

[8] Refer to section 8 of this Explanatory Statement for an explanation of “public policy outcomes”.

[9] As defined by section 5 of the Act.

[10] Further information on the application of CAIP Plans can be found (as at 1 July 2023) at: https://www.industry.gov.au/major-projects-and-procurement/australian-industry-participation

[11] As specified in the Declaration.

[12] Refer to section 8 of this Explanatory Statement for an explanation of “public policy outcomes”.

[13] The five-year Australian Government bond rate is the bond rate as published by the Reserve Bank of Australia immediately preceding the date a binding investment agreement is executed. The bond market yield is to be used.

[14] Refer to section 8 of this Explanatory Statement for an explanation of “public policy outcomes”.

[15] The five-year Australian Government bond rate is the bond rate as published by the Reserve Bank of Australia immediately preceding the date a binding investment agreement is executed. The bond market yield is to be used.

[16] Refer to section 8 of this Explanatory Statement for an explanation of “public policy outcomes”.

[17] The five-year Australian Government bond rate is the bond rate as published by the Reserve Bank of Australia immediately preceding the date a binding investment agreement is executed. The bond market yield is to be used.

[18] Refer to section 8 of this Explanatory Statement for an explanation of “public policy outcomes”.

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