Scottish National Investment Bank – Grand Challenges

The RSE has submitted a response to the Scottish Government regarding the proposed ‘grand challenges’ (missions), in which the Scottish National Investment Bank (the Bank) will invest. This response builds on engagement by the RSE with the government on the creation of the Bank for over three years.

The RSE has supported the creation of a mission-oriented development bank since its first consultation in 2017.  However, as the response makes clear, the Bank should begin with one mission rather than the three proposed in the consultation. This will allow the Bank’s Board and staff to gain experience on how best to engage with mission-oriented funding, before gradually adopting the others. Of the three missions outlined, the RSE believe that the climate emergency mission should be the first mission adopted.

If the Bank begins operations with the three missions proposed, then the Board and Strategic Team must consider where to focus investment in specific areas within these missions. If investment is not focused, then there is a risk that resources will be spread too thinly to make a significant and lasting impact. Furthermore, the RSE encourages the Scottish Government and Bank to consider how the Bank contributes to other areas of work in which there are clear connections, such as the digitalisation of the economy and implementation of the recommendations presented in Mark Logan’s report of the technological ecosystem in Scotland.

Paper Summary

The Royal Society of Edinburgh (RSE) has engaged extensively with the Scottish Government and the Scottish Parliament throughout the development of the Scottish National Investment Bank (the Bank). Through a range of advice papers, briefings roundtables and evidence sessions, the RSE has consistently voiced its support for the Bank and supported the passing of the enabling Act by the Scottish Parliament in January 2020.

The Bank will adopt a mission-oriented approach, and the proposed missions are outlined within the consultation as, Climate Emergency, Place-based Opportunity, and Demographic Challenges. While the mission-oriented approach is supported in principle, the RSE has consistently encouraged a gradual approach to the adoption of missions, starting with one clearly defined mission to avoid the resources of the Bank being spread too thinly. We are concerned that the proposal that the Bank focus on three valuable but distinct and very challenging, large-scale missions will make it difficult for the Bank to make a significant impact in any of these areas, particularly given the proposed level of capitalisation of £2bn over ten years (£200m per year).

We believe it would be preferable that the Bank focus on one mission, to begin with. This will provide it with a clear focus on which to frame its objectives and evaluation criteria. This will allow the Bank’s Board and staff to gain experience on how best to engage with mission-oriented funding. Of the three missions outlined in the document, the Climate Emergency mission, as the first to be proposed, should be the Bank’s immediate priority, before gradually adopting the others.

Whether the Scottish Government decides to start with one mission or all three, it will be vital clarity is provided over where the Bank chooses to invest within each mission area, and how it can add value. Moreover, it will be important vital for the Bank to engage with other government agencies, local government, and the private sector to complement existing investment and minimise the risk of duplication and waste.

The Scottish Investment Bank (SIB) has experienced relative success in investing in companies that have the potential for high growth across all sectors. As the Bank will subsume the SIB, we would expect the SIB to invest in the mission area(s) chosen, alongside investment in companies from all sectors. It will be important to ensure that the organisational setup and networks of the SIB are not destabilised as it is integrated with the Bank.

The growth of the tech sector, and digitalisation, will have a significant impact on the three proposed mission areas. The recent report by Mark Logan presents recommendations on how to grow the sector. As the Scottish Government has committed to implementing these recommendations, and with some focusing on the financing of companies within the sector, they along with the Board of the Bank, must consider what role, if any, the Bank can have in helping to implement the recommendations and achieve success in growing this sector.