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Scottish National Investment Bank

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Planning[edit | edit source]

Details
Item Scotland’s National Investment Bank – Scottish Government Consultation
Lead Paul Bradley
Start Date 1st October 2018
Completion Date 31st October 2018
Background
The Programme for Government 2017-18 committed to establish a Scottish National Investment Bank. An Implementation Plan was published in February 2018 setting out a strategic blueprint for the Bank as an institution. The Government accepted the Implementation Plan’s 21 recommendations and that approach was endorsed by the Parliament in May 2018.

This consultation will focus on the Bank’s objectives, purpose and governance, as well as its relationship with Ministers and stakeholders. These issues amongst others will inform further conversations with key stakeholders and responses to the consultation will help to shape the Bank’s Articles of Association and what is set out in the draft Bill and accompanying documents. The Bill will be brought forward in early 2019.

Context
  • The Sustainable Growth Commission Report
  • Scotland's private finance sector already moving to funds that support progress towards the SDGs - global leader?
  • Scotland's National Performance Framework now aligned to SDGs and purpose includes shift towards measuring wellbeing
  • Scot Gov Priority Areas include investing in people and infrastructure in a sustainable way, fostering innovation, promoting growth through fair and inclusive jobs & regional cohesion and promoting Scotland internationally.
  • Advisory Council on Women and Girls to increase efforts on gender equality, with sector leads calling for seven principles for a gender-competent bank to be adopted
  • Scottish Government has committed to low-carbon economy and setting up the Just Transition Commission to establish an economic and policy strategy to shift from fossil fuels and support labour market through transition.
  • Scottish Government has committed to taking forward financial transparency in its open government action plan with a specific mention of the National Investment Bank.
Relevant Policy Objectives
Third sector voice (Promote):
  • Promoting Sustainable Development Goals as a framework for sustainable finance.
  • Promoting open government to deliver appropriate governance, sector representation and financial transparency
  • Promoting equalities (Inc. gender), low-carbon economy and human rights approach.
Third sector futures (Develop):
  • Developing opportunities for new forms of finance in society
  • Developing and/or supporting third sector approach to gender, just transition and new funding models.
Foundations of policy approach
Sustainability Capital lending criteria that seeks to progress the Sustainable Development Goals and can be tracked through indicators and outcomes.
Equalities Finance that seeks to address entrenched inequality in Scottish economy, recognising marginalised groups & gender-competency.
Wellbeing Ethical financing that does not only measure performance on economic growth but also national and regional wellbeing. 
Openness A strong banking institution where the public understand where money flows and why financing decisions have been taken.
Policy Vision
To establish in the minds of Government and enterprise the view that a National Investment Bank should promote sustainable finance that can accelerate the transition to a zero-carbon economy where the benefits are realised across all groups in Scottish society. 
Policy Goals
1 Objectives & Vision: Sustainable Development Goals as a framework for SNIB investment and third sector access
2 Climate change: SNIB Investments are focused on Just Transition to Zero-Carbon Economy
3 Inequalities: Humanising national investment through gendered approach
3 Fair Work: Investment aligned with projects that adhere to Fair Work First
4 Aligned with the principles of financial transparency with third sector involvement
Deliverables
Delivered by Key activity Deliverable Completion date
Paul Research and policy approach X w/c 1st October
Paul First draft response X w/c 8th October
Paul Listening to sector stakeholders X w/c 15th October
Paul  Input from SCVO team X w/c 15th October 
Paul Second draft response X w/c 15th October
Paul Listening to sector stakeholders X w/c 23th October
Paul Final draft response X w/c 29th October 

Final Version Policy Paper[edit | edit source]

Our position[edit | edit source]

  • The Scottish Council for Voluntary Organisations (SCVO) welcome the proposals for a National Investment Bank. The Bank should be closely aligned with Scotland’s National Outcomes to deliver a sustainable and inclusive economy with improved wellbeing for Scotland’s people.
  • Projects and companies that are financed by the Bank should show a clear intention to work towards Scotland’s National Outcomes through enhancing our environment, increasing equality and securing a fairer economy that works for the whole of Scotland.
  • A clear conditionality framework is needed to make this a reality and the Bank should follow a social enterprise philosophy to remain true to its social impact purpose in the investments and reinvestments of surplus it makes.
  • The Bank’s governance and lending criteria should reflect the values of openness and participation. This will include drawing on the experiences and expertise of Scotland’s third sector to support the design of a fairer, inclusive and sustainable economy.

Public-purpose driven[edit | edit source]

The Scottish National Investment Bank provides the opportunity for Scotland to establish itself as a global leader in moving to a high-performing and modern economy. But economic growth is not an end in itself. The Bank should align its investments with Scotland’s National Outcomes in order to help us achieve a sustainable and inclusive economy with improved wellbeing for Scotland’s people.

The National Investment Bank should set the tone for the wider financial sector and draw on local experience in the area of sustainable finance and the third sector to adopt lending criteria, outcomes and indicators that ensure that the flow of investments link to Scotland’s National Outcomes and National Performance framework (NPF).

The Sustainable Development Goals (SDGs) have played a key role in the Scottish Government’s agenda setting having recently aligned the NPF with the SDGs. The SDGs are recognised by financial institutions across the world and underpin many new funds offered by Scottish investment houses. This connection provides an ideal eco-system for the Bank to adopt a vision and missions that ensure all investments contribute towards our National Outcomes, act to catalyse private investment towards the SDGs and support a sustainable and inclusive economy that is engaged with the world.

We recognise concerns over the Bank’s independence from the Scottish Government. We also note concerns relating to the financing of commercially viable projects from an economic growth perspective that undermine our environment and wellbeing. The National Outcomes and SDGs provide a suitable framework to overcome these challenges.

Objectives for the Bank[edit | edit source]

The National Investment Bank should follow a social enterprise philosophy to remain true to its social impact purpose in all the investments it makes, from affordable housing and community development to transport and other major infrastructure. The Bank should focus on a clear set of objectives to achieve its purpose. SCVO considers the following objectives as core pillars of any conditionality framework that can uphold the Bank’s mission-led, public-purpose vision through clear ethical lending.

Enhancing our environment[edit | edit source]

Scotland is highly dependent on fossil fuels as the principal source of energy and we agree with the First Minister’s statement that it would be “unthinkable” for the Bank not to focus on low-carbon lending. We welcome the proposal for decarbonising the economy as one of three missions of the bank and call for the bank to commit to financing only those projects that clearly intend to contribute to the transition to a zero-carbon economy. Finance is urgently needed to stimulate this shift.

The integrity of the Bank is strengthened through being aligned with the Scottish Government’s climate reduction plans and the forthcoming Just Transition Commission. The Bank should finance transformational technologies and innovation that would otherwise struggle to secure loans and lead to local economies missing out. Renewable electricity generation, renewable heat, low-carbon public transport, and energy efficiency measures should be included in lending and exclusions should be in place for practices that are widely regarded as unsustainable.

Increasing equality[edit | edit source]

The direct cost of inequality on the Scotland’s net fiscal position is estimated at more than £6.4 billion per year, whilst reducing Scotland’s gender pay gap (83.4%) to the levels of New Zealand (94.4%) would mean a net fiscal benefit of £3 billion. Reducing poverty and inequality is central to Scotland’s National Outcomes and the recommendations on participation and inclusion set out by The Sustainable Growth Commission; the Bank can play a key role in catalysing this shift.

The Bank’s governance and lending criteria must improve participation and equality in Scotland’s economy. It should finance a portfolio of projects and companies that reflect Scotland’s diversity, that are genuinely based on tackling inequalities and that delivers new opportunities for groups marginalised from existing arrangements. A key test of whether the Bank can fulfil this equalities objective will be how it supports gender equality; Engender Scotland, the Scottish Women’s Budget Group, Close the Gap, and Women’s Enterprise Scotland have produced seven principles that are vital for creating a gender-competent National Investment Bank.

Building social capital[edit | edit source]

The National Investment Bank will be one of the many drivers the Scottish Government has at its disposal to promote fair and progressive work and active employment policies. Projects that receive capital from the Bank should only do so on the condition that they pay the real living wage, offer proper contracts, are tax compliant and clearly intend to tackle gender-based inequality. It should also finance projects where employers support those living in deprived areas and offer training opportunities that help Scotland create a more inclusive society.

The Bank should invest to increase productivity in low-wage sectors so that everyone can share the benefits. It should catalyse a shift to valuing the contribution each of us can make beyond what is viewed as regular employment and contributors to growth, such as unpaid work and provisioning for others. One example would be caring, recommended as a key growth sector in the Scottish Parliament’s inquiry into the economic gains for closing the gender pay gap.

Investment in re-skilling and preparing for the ‘4th Industrial revolution’[edit | edit source]

The Bank should also be proactive and not reactive to the changes of Scotland’s future workforce, particularly in the light of increased automation, remote working and a low-carbon approach to workplace commuting. Investment should flow to those projects and companies that can accelerate our efforts towards a highly skilled workforce with transferable skills. Investment in innovation, re-skilling, training and knowledge is critical for the future of work and the skills system in Scotland and getting ahead of the transforming nature of work.

Open governance[edit | edit source]

Scotland’s National Investment Bank needs to position itself so that it works with people and communities to remove the barriers and structures that prevent a just transition to a sustainable and inclusive Scottish economy. The highest levels of transparency and governance must be a part of this approach and build on the Scottish Government’s commitment to financial transparency. In doing so, it will harness a unique opportunity to shape a different type of narrative and attitude towards financial institutions in Scotland.

Governance of the Bank must include different actors in the economy, involving public, private and third sectors from the very top to the bottom. Third sector organisations will provide expertise that can help the Bank to design a smarter, inclusive and sustainable economy, however it must also involve those groups that are traditionally marginalised from financial decision making.

An open lending process for the Bank will be key to articulating a clear view of why certain lending decisions are made. Straightforward, transparent and accessible presentation of this information could lead to more support of public spending in Scotland and result in greater confidence and trust in the Scottish Government’s £2 billion in funding it will provide over the next ten years. This should also cover how public funding has been spent by recipients of capital and the evaluation of its success to make sure systems are in place for the Bank to be outcomes-focused and to learn from experience.

Conclusion[edit | edit source]

SCVO welcomes the Scottish Government’s intensions to set up a Scottish National Investment Bank. However, it is important that the Bank does not contribute to business as usual and that it serves to shift the direction of the economy in Scotland for it to align with our national and international commitments. Central to this vision will be clear outcomes and conditionality that ensure all lending contributes to enhancing our environment, increasing equality and building Scotland’s social capital. A coherent and open approach to the Bank’s positioning, day-to-day running and lending will be critical for the Bank to deliver on a commitment to being mission-led and public-purpose driven.

About us[edit | edit source]

The Scottish Council for Voluntary Organisations (SCVO) is the national body representing the third sector. There are over 45,000 voluntary organisations in Scotland involving around 138,000 paid staff and approximately 1.3 million volunteers. The sector manages an income of £5.3 billion.

SCVO works in partnership with the third sector in Scotland to advance our shared values and interests. We have over 2,000 members who range from individuals and grassroots groups, to Scotland-wide organisations and intermediary bodies.

As the only inclusive representative umbrella organisation for the sector SCVO:

  • has the largest Scotland-wide membership from the sector – our 1,900 members include charities, community groups, social enterprises and voluntary organisations of all shapes and sizes
  • our governance and membership structures are democratic and accountable – with an elected board and policy committee from the sector, we are managed by the sector, for the sector
  • brings together organisations and networks connecting across the whole of Scotland
  • SCVO works to support people to take voluntary action to help themselves and others, and to bring about social change.
  • Further details about SCVO can be found at scvo.org.uk.

Contact[edit | edit source]

Paul Bradley

Scottish Council for Voluntary Organisations,

Mansfield Traquair Centre,

15 Mansfield Place, Edinburgh EH3 6BB

Email: politicalengagement@scvo.org.uk

Tel: 0131 474 8000

Drafting Notes[edit | edit source]

  • The Scottish National Investment Bank provides the opportunity for Scotland to establish itself as a global leader in moving to a high-performing and modern economy, one built on sustainable finance to accelerate the transition to a zero-carbon economy where the benefits are realised across all groups in Scottish society. We advocate an approach that will lead to a wholly mission-led and public purpose driven Bank focused on providing the capital required to support the most impactful work for the Just Transition towards ending poverty and increasing equality, wellbeing and sustainability throughout the regions of Scotland whilst leading on international standards of financial transparency.
  • Decarbonising the economy, promoting wellbeing and reducing inequalities should be the main focus of the Bank. However, it is unclear how the wider societal aims of advancing wellbeing and a sustainable, inclusive society will be fulfilled when economic growth is seen as the long-term aim of a bank that will act wholly commercially in the investment life-cycle. For the Scottish economy to truly become sustainable, economic growth should not be viewed as an end in itself and the field of Scottish finance must commit to change and embed sustainability into strategy and operations. The National Investment Bank should set the tone for the wider sector and draw on local experience in the area of sustainable finance to adopt lending criteria, outcomes and indicators that ensure that the flow of investments link to key public policies that support a sustainable Scotland.
  • It is vital for there to be closely alignment between the Bank and Scottish Government Policy, providing the Bank with missions that last and that have democratic legitimacy. The Sustainable Development Goals are widely recognised across the financial sector as the grand challenges our society faces today and investment houses such as Aberdeen Standard are already moving towards funds that underpin the SDGs, which range from gender equality, to peace, justice and strong institutions, education and reduced inequalities. In Scotland, the SDGs have played a key role in the Scottish Government’s agenda setting having recently aligned its National Performance Framework (NPF) with the SDGs, and growing civic engagement is being harnessed to make sure the potential of the SDGs is realised.
  • This provides an ideal eco-system for the bank to adopt a vision and missions that ensure all investments contribute towards the SDGs, whilst maintaining its independence from the Scottish Government. This approach would also address concerns over funding commercially viable projects from an economic growth perspective that undermine the values of sustainability, wellbeing and equality.
  • The National Investment Bank will need to motivate unusual actors to step forward to deliver social and environmental innovation if the institution is to support efforts towards transitioning to a modern economy that leaves no one behind. Scotland’s third sector is a common site for such thinking although charities and voluntary organisations are not referenced in any part of the proposals for the Bank. Whilst the Bank looks geared towards financing long-term risk bearing projects in the public and private sectors, the Scottish Government must not limit the role of the third sector in guiding the public value and purpose of the Bank or be excluded from accessing the Banks patient capital. Loans at very low rates would also assist many third sector groups at the heart of communities and that do not have significant bank reserves to take forward innovation towards a Just Transition.
  • We welcome the proposal for decarbonising the economy as one of three missions of the bank and call for the bank to commit to financing only those projects that clearly intend to contribute to the transition to a zero-carbon economy. By aligning lending criteria to the Sustainable Development Goals (SDGs), the integrity of the bank is strengthened through contributing to the Scottish Government’s climate reduction plans and the forthcoming Just Transition Commission.
  • We support the proposal to integrate existing infrastructure funds – such as the Building Scotland Fund – into the bank to simplify and enable all future national infrastructure projects on housing, heating, electricity and transport to help build Scotland’s zero-carbon economy. Activity of the bank should be part of a joined up economic strategy that puts tackling climate change and reducing inequalities at its heart; whilst the recommendations of the Just Transition Commission should not be pre-empted, this new financial institution should anticipate the future direction that will be set by the Commission as well as abiding by the Scottish Climate Change Act.
  • Providing finance for transformational technologies to reduce carbon emissions should be a key mission of the bank, as too should the financing of community specific projects that often require small amounts of finance but struggle to find the funds. For example, the Scottish Government’s vision for a mostly decarbonised heat sector by 2050 could be supported by financing micro and community power generation to support the rapid move away from natural gas heating and subsequently boost local energy economies. This would support the Bank’s objective of regional cohesion. Other areas include increasing wind power, investing in sustainable public transport infrastructure and investing in the renewables manufacturing industry to support the decline in jobs in North Sea oil.
  • Reducing poverty and inequality is at the heart of the SDGs, Scotland's National Performance Framework and the recommendations on participation and inclusion set out by The Sustainable Growth Commission. The National Investment Bank’s governance and lending criteria must support the moral imperative to improve participation and equality in Scotland's economy and move to financing projects that reflect Scotland’s diversity and are genuinely based on tackling inequalities. It is essential that the Bank abides by Public Sector Equality Duties. It must also adopt a mind-set that delivers new opportunities for groups that evidence shows have less capital and that it lifts constraints on realising the full potential of those marginalised from existing arrangements.
  • A key test of whether the Bank can fulfil this equalities objective will be how it supports gender equality, a key priority of the Scottish Government and a specific UN SDG based on clear and mounting global evidence that gender equality is good for sustainable growth. Engender Scotland, the Scottish Women's Budget Group, Close the Gap, and Women's Enterprise Scotland have produced seven principles that are vital for creating a gender-competent National Investment Bank. The Scottish Government should work closely with key stakeholders to ensure the right governance framework is legislated for to address the priority areas and persisting gaps in gender equality across Scotland’s economy.
  • Scotland's National Investment bank will be one of the many drivers the Scottish Government has at its disposal to promote Fair Work First. Lending criteria of the Bank should contribute to a shift in our approach towards a person-centred and human rights based labour market that genuinely help individuals into sustainable and meaningful employment. We advocate this approach to empower people to participate in society as articulated by the SDG on good and productive employment.
  • The Bank should commit to financing only those employers who want to make a meaningful contribution to the fair work agenda and creating a more equal society. Projects that receive capital from the Bank should pay the real living wage, offer proper contracts and clearly intend to tackle gender-based inequality. It should also fund projects where employers support those living in deprived areas, offer training opportunities that help Scotland create a more inclusive society and invest to increase productivity in low-wage sectors so that everyone can share the benefits. This approach would uphold people’s rights to equality of opportunity, inclusion and accessibility in Scotland’s labour market.
  • An equalities competent National Investment Bank rests on an appetite to shift our approach to valuing the contribution each of us can make to Scottish society beyond what is viewed as regular employment and contributors to growth. Scotland’s National Investment Bank should be part of a strategic and better connected Scottish approach to supporting all people to participate in a society that is personalised to what they need and what they can offer, from long-term care and child care to volunteering. Innovative and creative investment in this infrastructure is crucial for Scotland’s growth and wellbeing.
  • Scotland’s National Investment Bank needs to position itself so that it works with people and communities to remove the barriers and structures that prevent a just transition to a sustainable Scottish economy. The highest levels of transparency and governance must be a part of this approach and build on the Scottish Government’s commitment to financial transparency in its Open Government Action Plan through increased accountability, engagement and trust. In doing so, it will harness a unique opportunity to shape a different type of narrative and attitude towards financial institutions in Scotland.
  • The National Investment Bank must adopt participative and open governance to make sure the benefits are realised across all groups in Scottish society. Governance of the Bank must include different actors in the economy, involving public, private and third sectors from the very top to the bottom. This collaboration will be essential to devising a framework that allows the Bank to act in a way that supports its missions through a more developed understanding of the toughest problems to tackle. Third sector organisations will provide expertise that can help the Bank to design a smarter, inclusive and sustainable economy, however it must also involve those that are traditionally marginalised from financial decision making.
  • Taking risks and experimenting with how the Bank finances projects is all part of transitioning to a high-performing and modern economy. However, this bold approach will require even greater transparency around how the Bank operates. An open lending process for the Bank will be key to articulating a clear view of why certain lending decisions are made. Straightforward, transparent and accessible presentation of this information could lead to more support of public spending in Scotland and result in greater confidence and trust in the Scottish Government’s £2 billion in funding in will provide over the next ten years. This should also cover how public funding has been spent by recipients of capital and the evaluation of its success to make sure systems are in place for the Bank to learn from experience. Enabling people and communities to participate in this process is key to adopting an impact assessment with integrity that moves beyond the typical cost/benefit analysis and understands the wider contribution a project has made.