“Several years” before the Scottish National Investment Bank was self-sufficient

MSPs have been warned that the Scottish National Investment Bank will not become financially self-sustaining for at least three years due to longer-term investments, meaning returns are “slower to come”.

The bank’s president also told MSPs that work was underway to get the public body fully regulated – warning that without the decision, three “missions” defined by SNP ministers would not be achieved.

The bank was launched in November last year and has handed over £ 2bn of Scottish government public money over a 10-year period to invest.

The Scottish government has set it three missions: ‘supporting the transition to net zero’ and ‘building communities and promoting equality’, in addition to being able to ‘harness innovation in a way that enables our people to succeed. ‘flourish’.

But Willie Watt, the chairman of the bank, told Holyrood’s Net Zero committee that he would not be able to fulfill its mission without becoming a fully regulated bank by the Financial Conduct Authority (FCA) – steps being taken now. to ensure that happens.

Mr Watt told MSPs that seven projects have so far received total funding of £ 120million, stressing that “we have been active since our launch”.

READ MORE: New Scottish bank opens with £ 12.5million investment in pioneering Glasgow laser company

He said: “In the first quarter of this fiscal year we made investment commitments of £ 62million, of which £ 50million was drawn.

“We are on track to invest the £ 200million pledge that was in the Scottish budget for this year.”

Mr. Watt added, “Our investments are contributing to a range of innovative and exciting projects in the areas of tidal power innovation, net zero insulation for homes, forestry and construction. recharging of electric vehicles.

“We also have a pipeline of investments that we are working on – some of which will certainly contribute to our mission of zero net.”

PSMs were also told that it would take several years for the bank to be financially self-sufficient and depend on public finances to operate.

Conservative net zero spokesman Liam Kerr has insisted that the bank’s chief executive, Eilidh Mactaggart, hopes he will no longer be dependent on public money after research has estimated the costs of setting up and d ‘operation between 2018 and 2023 at £ 50million.

Ms. Mactaggart told MSPs that financial self-sufficiency was “something that we are very focused on achieving”.

She added: “We hope to achieve this in the medium term. What is important about financial independence are the fluctuating returns on investment. ”

As an example, the managing director said the bank might achieve autonomy in the fourth or fifth year, but will want to “make sure we can keep it” before severing ties. with funding from the Scottish government.

READ MORE: Tidal energy firm aims for growth after securing £ 6.4million from Scottish investment bank

She added that the operating costs for this year are “estimated to be around £ 15million with additional income the bank will make to contribute to that cost as well”.

She said, “We won’t fully cover that cost this year or the next two years, we don’t expect to. It depends a lot on the constitution of the portfolio.

“Our patient capital nature of the investments we make means that the returns tend to be backward and slower to materialize. ”

Mr Kerr asked officials that the bank is not currently authorized or regulated by the Prudential Regulatory Authority or the Financial Conduct Authority (FCA).

He added: “How is it still a bank given that it is not that regulated?

“Do you intend to officially become a bank and thus become regulated? ”

Mr Watt told the committee that “the opinion of the bank’s own advisers and government advisers” was that the body would begin to operate unregulated.

He said: “This is a position that the Financial Conduct Authority is very comfortable with.”

READ MORE: What is Scotland’s investment bank doing amid coronavirus crisis?

Mr Watt added: “Do we intend to be regulated by the FCA – the answer is yes. We believe this is important for the continued development of our missions.

“£ 2 billion over 10 years is a significant amount of public discovery and we are very, very careful about the management of this public capital. ”

But he warned “that it is not enough to achieve the objectives that we have to fulfill our missions”.

Willie Watt, Chairman of the Scottish National Investment Bank

Mr Watt added: “To do this we need to be able to manage third party capital. And in order to be able to manage third-party capital, we believe we need to be regulated by the FCA because that will give people the confidence to trust us with their capital to manage.

“Eilidh and her team are running a project with FCA that is going on right now.”

Mr Watt pointed to estimates by the Scottish Government’s statutory adviser, the Climate Change Committee, that ‘Scotland will need to invest £ 5 billion a year over the next 10 to 20 years’ to meet its strict targets of zero net.

He said: “It has to come from the private sector and the private sector will only invest if it generates positive returns.

“The alignment between making good investments that make sense for climate change and making commercial returns is a really important combination. It is a combination that we want to promote and encourage.