The Scottish National Investment Bank was launched by the Scottish Government on Monday 23 November and I am pleased to outline to Parliament how the missions that have been set for the bank will help to direct investment towards addressing the major challenges that Scotland faces.
In the months prior to launch, the bank secured state aid approval from the European Commission and advertised and recruited the board. It expects to have 60 staff members in place by the end of year 1, including all the senior executive team members.
The bank continues to develop its investment pipeline and will be funded with £75 million for investments for the remainder of the year and £200 million for next year.
The launch, which has been delivered on time despite the significant complications arising from the coronavirus pandemic, delivers on our Government’s commitment to establish a national investment bank to provide the patient and growth capital that the Scottish economy needs for the future. It is the single biggest economic development in the lifetime of the Parliament and I thank MSPs for supporting it unanimously.
When we started the process three years ago, we could not have predicted how much we would need the bank today. With the economic shock that we face, and the kind of recovery that we need to make, the bank and its ability to offer patient capital will be more crucial than ever, as will its ability to work with our enterprise agencies and the private sector in supporting businesses to recover and grow in Scotland.
As legislated for in the Scottish National Investment Bank Act 2020, the bank will adopt a mission-oriented approach when providing finance. The missions have been set by the Scottish Government and address the grand challenges that Scotland faces—the issues that we know that we must face to build a sustainable future for Scotland. That mission-oriented approach allows the bank to operate independently to crowd in investment, create and shape new markets and promote inclusive economic growth, while also offering an innovative approach to addressing key socioenvironmental challenges in Scotland.
The mission-oriented approach for the bank has been in development for a long time. Working with international experts Professor Mariana Mazzucato and Laurie Macfarlane at University College London’s institute for innovation and public purpose, we developed “A mission-oriented framework for the Scottish National Investment Bank”. That has helped translate the grand challenges into concrete missions that have a clear direction; are targeted, measurable and time bound; are ambitious but realistic; are cross-disciplinary and cross-sectoral; and involve multiple bottom-up solutions.
Alongside the framework, the development of the bank’s missions has been informed by stakeholder engagement, the illustrative missions in the implementation plan, responses from parliamentary procedures, Government policy priorities and the national performance framework. From the outset of the work to establish the bank, the missions have been a constant measure in ensuring that the bank provides the greatest benefit to Scotland and is aligned with the economic priorities of the Scottish Government and opportunities for Scotland.
It has been important to consult widely on the missions, because it has to feel like Scotland’s bank, and as a result of that a more wide-reaching range of missions has been proposed and subsequently supported. They revolve around the themes of transitioning to a low carbon economy, promoting inclusive growth through placemaking and local regeneration, and responding to emerging demographic pressures. Those themes were further supported through broader engagement with stakeholders, while other policy priorities were considered throughout the development process of the bank’s missions.
The Scottish Parliament has been instrumental not only in its unanimous support for the act that established the bank, but, more recently, in its support for the missions that were presented to it and the public in late August for final comment.
I am now pleased to announce that the final missions were communicated to the bank yesterday, on 1 December, through a letter addressed to its chief executive officer, Eilidh Mactaggart. Let me set them out in turn.
The primary mission of the bank will be a net zero mission to address the climate emergency through making investments in relation to
“Achieving a Just Transition to net zero carbon emissions by 2045”,
“Invest in rebalancing our economy towards leadership in sustainable technology, services and industries.”
The net zero mission of the bank aligns with and supports the Government’s policies to deliver a sustainable green economy, as outlined in our programme for government and the climate change plan. It will help to drive investment into innovative sectors and companies and tackle climate change, and it will offer patient capital to help facilitate the development of new technologies essential in addressing the climate emergency.
The second mission of the bank—its place mission—is focused on developing place-based opportunity throughout Scotland. To achieve that, the bank’s mission is to make investments to support
“Extending equality of opportunity through improving places by 2040”,
“Invest in places and regeneration to reduce inequality, and improve opportunities and outcomes for people and communities.”
That mission will allow for investment in the kinds of places that people want to live and work in—ones that are good for health and wellbeing and which involve the local community. The mission will help to support the good work that is being carried out by, for example, the empowering communities programme and the more homes Scotland approach. Place-based investment will reduce inequality and improve opportunities through increased availability of housing options, secure employment, education and commercial prospects.
The final mission of the bank—its people mission—seeks to address the demographic change that Scotland is experiencing now and will experience in the coming years. That is about not just demography and ageing populations, but helping our people adapt to a changing world. The mission asks the bank to make investments in line with
“Harnessing innovation to enable our people to flourish by 2040”,
“Invest in innovation and industries of the future for a healthier, more resilient and productive population.”
That mission and the bank’s investment in innovation is an opportunity for businesses and organisations to increase productivity and to raise skills levels in the economy. Innovation is essential in achieving all the missions that are outlined for the bank, with new and developing technology at the heart of driving the response to climate change and the inequality of place-based opportunity.
The bank’s inaugural investment of £12.5 million to M-Squared Lasers perfectly illustrates the mission-oriented basis of the bank in looking beyond financial returns and towards social and environmental returns through investment in the innovative companies of Scotland.
Those missions represent the directions in which the Scottish Government would like the bank to focus its investments in order to provide finance and act to catalyse private investment to achieve a step change in growth for the Scottish economy, by powering innovation and accelerating the move to a net zero emissions and a high-tech, connected, globally competitive and inclusive economy.
Those missions are not in place to constrain the bank’s activity. Ultimately the bank will be required to invest in opportunities in line with its vision, objects, missions and ethical standards. Therefore, the missions should be viewed as part of a wider picture of the bank’s governance, rather than in isolation.
The 2020 act requires that ministers lay before Parliament a statement describing how the consultation influenced the content of the document sent to the bank. That statement is in development and will be laid before Parliament later this month.
The bank will measure its performance against a balanced scorecard, as set out in the 2020 act. The balanced scorecard will capture the environmental, economic and social impact of the bank’s investments, as well as its financial performance.
It is important to note that it will take time for the impact of the bank’s activities to be evidenced. The long-term nature of the missions means that social, economic and environmental returns should not be expected shortly after the bank has been vested. The bank will be expected to deliver those impacts in the medium to long term.
Of course, those are the bank’s first missions. The 2020 act requires the Government to review the bank’s performance at least every five years, reporting back to Parliament and the public. The same consultation process will apply if the Government proposes to modify or end any of the bank’s missions, or set new ones, to reflect changes.
The Covid-19 pandemic has caused a huge health and economic shock to Scotland. On the economy, the Scottish Government set out a four-step plan to respond, reset, restart and recover. Although the initial economic shock of Covid-19 is expected to be shorter than the long-term nature of the bank’s mission-oriented investment objectives, the bank is expected to play a key role in supporting Scotland’s recovery by delivering patient and sustained investment. In that, the bank will work closely with established agencies, in particular Scottish Enterprise. There have already been constructive discussions between the two on their areas of focus and collaboration.
If anything, the immediate impacts of Covid-19 underline the need for the bank and support the adoption of a mission-oriented investment approach. The climate emergency, place-based opportunity and demographic change represent compelling challenges now more than ever.
The bank is uniquely placed to work towards addressing those challenges, through providing patient capital to support long-term economic growth in tandem with the business community and public sector partners. The bank’s mission-oriented approach provides a unique opportunity to influence the direction of economic recovery in the long-term interests of the people of Scotland.
The missions for the Scottish National Investment Bank have been developed with broad stakeholder engagement across Scotland, civic organisations, the general public and colleagues in the Cabinet and Parliament, and in line with the legislation laid out in the Scottish National Investment Bank Act 2020. They help to form the basis of the relationship between the Scottish Government and the bank.
Once again, I thank members for their unanimous support in establishing this institution of our national economy and in helping us to set its direction.