Scottish National Investment Bank chairman addresses departure of CEO

Two members of the Scottish National Investment Bank’s board have been questioned by the Economics and Fair Work Committee over the recent resignation of its chief executive.

Eilidh Mactaggart resigned at the end of February, citing personal reasons, leading to speculation about the timing.

Chairman Willie Watt explained that he was informed of his decision on January 27, with shareholders, the board and the government informed on January 31.

“As an employer, we respect her decision and her request for confidentiality,” he said, adding that Mactaggart wants to spend more time with her young family and will consider future opportunities as she sees fit.

As for the search for a new chief executive, he admitted that an appointment is unlikely to be made before the end of the second half of this year.

“It will take some time to recruit the right person, we will have to make sure we have a wide funnel to attract a wide range, and then there will be a diligent process to make sure we get the right person.

That delay wasn’t “too much of a concern” for Watt, as he’s confident current CFO and interim chief executive Sarah Roughead will pull through until then.

He also confirmed that the bank will use external research consultants “to broaden the trawl”, identifying a set of companies that “have the right capabilities”, with proposals sought on both cost and capacity.

Board member Carolyn Jamieson – also Trustpilot’s head of trust – said “the bank has done remarkably well, with a strong team to take over the reins”.

She also confirmed that there was no severance package or non-disclosure agreement.

Responding to a question from Liz Smith MSP, Watt also confirmed that there were no disagreements over policy or the direction of the bank between the chief executive and the Scottish government of which he was aware.

Regarding the activities of the public development bank, Watt explained that since its launch in November 2020, it has closed 13 investments, totaling £191 million in committed capital.

It is currently studying 50 opportunities spread over its three missions and over a large geographical area.

The three missions: achieve a just transition to net zero by 2045; expand equality of opportunity by improving places by 2040; and harnessing innovation to enable people to thrive by 2040.

Growing from a skeletal initial team in 2020, the bank now has 62 employees.

At first, Watt said there was significant pent-up demand, with the bank open to people who came to it with opportunities, as well as referrals from existing corporate agencies.

“Going forward, we want to make outbound origination more widespread, with more mission-appropriate opportunities,” noting that heat decarbonization is an area that will require a lot of private sector capital, “so we will target companies engaged in this during the bank’s second year”.

Explaining the process, Watt said his team always starts with the right mission, before researching whether there is a business investment opportunity – “we don’t give grants, we expect to make a positive return for the reinvestment”.

The third element is respect for state aid, because “we don’t want to crowd out the private sector”, he noted, adding that “our landing zone is at the center of these three overlapping rings”. .

Loan investments tend to be very long-term, patient capital, although there are some project finance loans that can be shorter term.

Echoing earlier comments about difficulties in the region from Finance Secretary Kate Forbes, Watt said: “We are passionate about scaling up Scottish businesses, and we need more of that in Scotland – Skyscanner is a great example – but it’s a long-term process.

“Large-scale businesses have a much bigger impact on productivity,” he continued, noting the bank’s £30m investment to help complete Aberdeen Port, explaining that its Loans are often larger, while equity investments are smaller, but there are more.

“In the scaling space there is capital available at the beginning, while in later stages the private sector is able to finance, but there is a bit in the middle where there is a role for the bank.

“The gap between Series A and Series B is where we can help achieve the milestones required to receive capital from the private sector – by providing either seed funding or key capital that “holds the ‘ark’.

Watt said there are many projects that would not have seen the light of day without the bank’s involvement, “so it’s important that we highlight the type of projects that we think we can invest in,” adding that this can “demonstrate a level of professionalism which then attracts private investors”.

Watt also admitted, “We won’t do our job if every investment performs, because we have to take bigger risks than the private sector; so we will have losses.

“As things stand, I’m very comfortable with the positioning of the portfolio.”

Performance is measured across a number of metrics – on assignments the bank puts covenants in place, while on project finance it is often how well time-specific targets are met.

Watt also mentioned the bank’s grant monitoring team, which operates separately from the investment team, reviewing all opportunities to find out whether companies have genuinely been unable to access private funding, before referring to these statements.

“We then apply the state aid approval framework, so there is an auditable thread running through it all.”

Responding to further questions from MSPs, Watt admitted that his team could better explain some of his investments – “we’ve been a bit naïve in that sense” – so in the future he pledged to give back more of this. public.

“We’re still learning, there are unintended consequences from most types of activity, and that’s certainly true of investing.”

Regarding a specific investigation into the bank’s support of the Gresham House Forest Growth & Sustainability Fund, Watt explained that the market failure was that the fund had a much higher percentage of native species and new plantings than it did. was not the case historically – the theory given that at a time when planting became more widespread, there would be a demand for a fund based on sustainability.

“They couldn’t find a top-tier investor, so that was our role – as I said, the first capital is often the hardest,” he said, adding that schemes public sector pensions are the next most important investors.

Finally, responding to questions about the bank’s target rate of return, Watt said that ultimately that decision was up to ministers, but his team would advise on what they thought was right.

“Most of our investments won’t be listed because that’s where the biggest market failure is, but that said, there are benchmarks for innovation and infrastructure investments – so they should help us. to determine what the target rate of return might be.

The bank’s new business plan is expected to be released before the end of March and will place greater emphasis on stakeholder engagement.

“We have our house in order, so we should go out into the world more aggressively,” Watt concluded.

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