Scottish National Investment Bank missions: consultation

3. The Proposed Missions

Mission 1 (Net Zero Mission)

Grand Challenge 1:

Climate Emergency

Mission 1 (Net Zero Mission):

Achieving a Just Transition to net zero carbon emissions by 2045.

Invest in rebalancing our economy towards leadership in sustainable technology, services and industries.

28. Scotland and the rest of the world is facing a climate emergency and our wellbeing, along with that of future generations, is at risk. In 2019, the Scottish Parliament passed legislation adopting a net zero emissions target by 2045.^[13] Adopting this net zero emissions target by 2045 underlines the ambition that Scotland will no longer contribute to global climate change.

29. The Scottish National Investment Bank Act 2020 (the Act) states that the Bank should have an ancillary object regarding promoting environmental wellbeing, particularly on supporting this transition to net zero emissions. The Act also specifies that it should support circular economy initiatives and biodiversity as part of this ancillary object to promote environmental wellbeing.

30. Further to this, the First Minister has already announced that supporting the transition to net zero will be the Bank's primary mission^[14]. By setting this as the Bank's primary mission, the Government expects significant investment activity to occur under this mission.

31. The Bank has a valuable role to play in rebalancing Scotland's economy away from carbon towards leadership in sustainable technology, services and industries. Harnessing the power from businesses and third sector organisations to achieve this has never been more important.

32. The Bank will be operationally independent when it is making its investment decisions and so it is for the Bank to determine how it will invest to meet this mission. However, for the purposes of illustration, it could be anticipated that to meet this mission the Bank may invest in areas which support:

• Low emission transport;
• Carbon neutral power generation, storage and distribution;
• Carbon neutral domestic and commercial heat generation and distribution;
• Carbon neutral industry and agriculture;
• Domestic and commercial energy-efficiency initiatives; and,
• A circular green economy.

33. The Bank's investments towards this mission could increase Scotland's resilience by supporting the usage and prevalence of more sustainable supply chains for the production and distribution of energy.

34. Providing finance and crowding in investment towards this mission will form part of Scotland's 'Green New Deal'^[15]. This will kick‑start investment and build the momentum needed to make a significant impact on reducing emissions and guaranteeing new, high quality jobs to support the resilience of Scotland's workforce and communities.

35. This proposed mission will particularly direct the Bank to support a Just Transition to net zero. The principles of a Just Transition, as defined in the Climate Change (Emission Reduction Targets) (Scotland) Act 2019, are the importance of reducing net emissions in a way in which:

• Supports environmentally and socially sustainable jobs;
• Supports low-carbon investment and infrastructure;
• Develops and maintains social consensus through engagement with workers, trade unions, communities, non-governmental organisations, representatives of the interests of business and industry and such other persons as the Scottish Ministers consider appropriate;
• Creates decent, fair and high-value employment opportunities in a way which seeks to minimise negative impacts on the current workforce and overall economy; and
• Contributes to resource efficient and sustainable economic approaches which help to address inequality and poverty.

36. As such, this primary mission clarifies that transitioning to net zero should be done in a way which maximises economic and social opportunities, builds on Scotland's existing strengths, while also taking the opportunity to mitigate arising societal risks. The Bank will seek to complement the work of the Just Transition Commission, which will provide practical advice on how best to achieve a Just Transition.

37. In addition to the Climate Change Plan and Just Transition Commission, this proposed mission further aligns with other current policy regarding the climate emergency. This includes, but is not limited to:

• Protecting Scotland's Future: The Government's Programme for Scotland 2019-2020^[16]
• Climate Ready Scotland: Climate Change Adaptation Programme^[17]
• Hydro Nation agenda^[18]
• Active Nation agenda^[19]
• Circular Economy Strategy^[20]
• Proposals to introduce a deposit return scheme^[21]
• The Energy Efficient Route Map^[22]
• Scotland's Energy Strategy^[23]
• The Scottish Biodiversity Strategy^[24]
• Proposals to transition to low carbon transport^[25]
• Scotland's Land Use Strategy^[26]

38. In terms of aligning to the National Performance Framework (NPF), whilst individual projects under this mission may impact across all 11 national outcomes and could be measured in such a way, it could be expected that this proposed mission would contribute most strongly to the following national outcomes:

• We value, enjoy, project and enhance our environment;
• We have a globally competitive, entrepreneurial, inclusive and sustainable economy;
• We tackle poverty by sharing opportunities, wealth and power more equally;
• We are healthy and active;
• We live in communities that are inclusive, empowered, resilient and safe;
• We have thriving and innovative businesses, with quality jobs and fair work for everyone; and
• We are open, connected and make a positive contribution internationally.

Mission 2 (Place Mission)

Grand Challenge 2:

Place-Based Opportunity

Mission 2 (Place Mission):

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.

39. Differences and inequalities exist across Scotland's places in terms of income, employment, education, health, geographical access, crime, and housing. This is captured by the Scottish Index of Multiple Deprivation^[27], and a large range of wider indicators covering other economic, social and environmental outcomes is captured through the Inclusive Growth Outcomes Framework^[28]. This variation across places is important for considering how disadvantaged or advantaged Scotland's places are, and what this means for wellbeing and opportunities for the people who live there.

40. Research suggests that the prosperity of places^[29] and the available opportunities in those places, is interdependent on the prosperity of people and businesses in those places. The Advisory Group on Economic Recovery has further recognised the importance of place for Scotland's economic performance, and also for the strengthening of communities and Scotland's 'social capital'. Place-based interventions are crucial for economic and societal returns, including tackling inequality.

41. The Government recognises that there is an expectation for the Bank to work to extend equality of opportunity through improving places right across Scotland. The Bank could invest in both rural and urban areas in pursuit of this mission.

42. A 2040 target date has been proposed for this mission. This will provide the Bank with a sufficient amount of time to evidence its impact over the medium- to long-term.

43. The Scottish Government has recently held a consultation gathering views on how our homes and communities should look and feel by 2040, and the options and choices to get there.^[30]This consultation will inform the final vision and route map for 'Housing to 2040'. When published, 'Housing to 2040' is expected to help inform how the Bank delivers against this mission. This will be a further opportunity for the Bank to seek to align its investment activity with relevant Scottish Government policy and deliver against stakeholder expectations.

44. The Building Scotland Fund is a pre-cursor fund for the Bank and while the Fund's investments have preceded this proposed mission, the Fund aims to reflect the values, principles and ambitions of the Bank. It is therefore a promising sign of what we could expect from the Bank regarding place-based investments.

45. As of March 2020, the Fund had agreed investments of £102 million, unlocking projects in excess of £240 million which will provide a significant boost to the Scottish economy. The Fund is supporting the development of over 5,500 homes and 600 associated full time jobs. £25 million from the Fund is also supporting a range of regeneration, industrial and commercial property projects through the Scottish Government's SPRUCE fund.

46. This proposed mission has been designed to facilitate the continuation and further development of the type of financial support that the Building Scotland Fund provides, while including further social value elements. The mission further considers how the Bank can work strategically to maximise transformational outcomes by investing in places to reduce inequality and improve opportunities through increased availability of housing options^[31], secure employment, education and commercial prospects.

47. The Bank will be operationally independent so it is for the Bank to determine how it will invest to meet this mission. However, for the purposes of illustration, it could be anticipated that to meet this mission the Bank may invest in areas which support:

• Housing (meeting need and enhancing choice and availability);
• Regeneration;
• Industrial and commercial projects across a wide range of businesses; and,
• Commercially viable local community sustainability, equality and inclusion projects.

48. In terms of alignment to current policy, this proposed mission has been developed considering the understanding and importance of place as set out in the Place Principle^[32]. In particular, the Place Principle states:

"Place is where people, location and resources combine to create a sense of identity and purpose, and is at the heart of addressing the needs and realising the full potential of communities. Places are shaped by the way resources, services and assets are directed and used by the people who live in and invest in them."

49. This proposed mission further aligns with current policy regarding Scotland's places. This includes, but is not limited to:

• More Homes Scotland approach^[33]
• Empowering Communities Programme^[34]
• Housing and Regeneration Outcomes Framework^[35]
• Planning Policy^[36]
• City and Regional Growth deals^{[37], [38]}
• National Planning Framework^[39]
• Town Centre Action Plan^[40]

50. In terms of aligning to the NPF (whilst again this mission will potentially cut across all national outcomes), it could be expected that this proposed mission would contribute most strongly to the following:

• We have a globally competitive, entrepreneurial, inclusive and sustainable economy;
• We tackle poverty by sharing opportunities, wealth and power more equally;
• We are healthy and active;
• We live in communities that are inclusive, empowered, resilient and safe;
• We grow up loved, safe and respected so that we realise our full potential;
• We have thriving and innovative businesses, with quality jobs and fair work for everyone;
• We are open, connected and make a positive contribution internationally; and,
• We value, enjoy, protect and enhance our environment.

51. Working towards this mission will require investing in different types of projects which aim to extend equality of opportunity in ways which best serve the particular places they are based in. As such, a variety of relevant indicators will be used to show progress made against a variety of national outcomes to measure social, environmental and economic impact. More information on measuring the Bank's performance can be found in section 5.

Mission 3 (Demographic Mission)

Grand Challenge 3:

Demographic Change

Mission 3 (Demographic Mission):

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.

52. Official figures published in 2019 project that, while Scotland's population is expected to increase, many communities in Scotland will experience the dual challenge of both an ageing population and rural depopulation:

• There is expected to be 240,000 more pensioners by mid-2043 and the working age population is set to fall by 7,000 over the same period^[41];
• Scottish council areas with the highest percentage reductions in population are forecasted to be mainly rural and island areas, as well as areas in the West of Scotland;
• Areas in Scotland which have a median age of 54 years or over were mainly rural or island areas^[42]; and,
• By 2040, the number of those aged 90 and over is projected to approach 80,000 and nearly 20% of the population will be aged 70 and over.

53. In addition, technological advancement and innovation are expected to further bring changes to how Scotland's population will live and work. The workforce is expected to experience significant change and a demand for new skills through increased used of innovative technologies, such as artificial intelligence and automation.^[43]

54. Given these multiple changes to Scotland's population, the proposed grand challenge refers to demographic change more broadly rather than just the aging population. These demographic changes could significantly impact on Scotland's economic growth performance, the demand for services, and the quality of future services provided.

55. This proposed mission would specifically direct the Bank to support a changing population to flourish through harnessing innovation. Innovative products and services both pose threats and opportunities depending on how they are used.^[44] For instance, it is easy to see how innovative technologies could change the nature of work and leave behind those who are unable to adapt.

56. However, innovation could instead be harnessed to increase productivity and provide workers with new skills. There are also major opportunities to use patient capital to unlock innovation for improved public services and wellbeing, particularly through innovations in digital healthcare and life sciences which respond to public health challenges. As such, it is anticipated that the Bank could invest in innovation and industries of the future to support a healthier, more resilient and productive population. This further aligns with the responses gathered in the second consultation, with many respondents identifying the need for the Bank to support innovation.

57. A target date of 2040 has been proposed for this mission. As with the second proposed mission, this will provide the Bank with sufficient time to evidence impact. Further, Scotland is projected to experience significant changes to its population across this period.

58. Figures 1 and 2 below show the difference between Scotland's current population and the projected population by 2040 across age groups^[45], and council areas^[46]. Looking at these projected changes, we can see that many rural and island communities will face decreasing and ageing populations which can bring significant challenges across the next 20 years. These changes ought to be considered alongside technological advancement and innovation which will bring further shifts to how Scotland's population will live and work across the next 20 years.

59. The Scottish Council for Development and Industry (SCDI) is supportive of this proposed mission for the Bank. SCDI's Deputy Chief Executive, Matt Lancashire, said:

"SCDI strongly backed the creation of the Scottish National Investment Bank, and its mission-oriented approach, to help businesses access the patient capital they need to innovate, grow and internationalise. We now welcome this proposed mission for the Bank.

"Our extensive research in recent years – including our ongoing Big Data and Health Economy project exploring how technological innovation could transform health & social care to save lives, reduce costs and create jobs – demonstrates that the Bank could unlock significant social and economic opportunities by investing in technological innovations which respond to our demographic and public health challenges."

60. The Bank will be operationally independent so it is for the Bank to determine how it will invest to meet this mission. However, for the purposes of illustration, it could be anticipated that to meet this mission the Bank may invest in areas which support:

• Assisted living and flexible housing;
• Medical technologies and technology enabled care;
• Automation while supporting changing skill needs;
• Life sciences;
• Data driven innovation; and,
• Digital capabilities and infrastructure^[47].

61. This proposed mission further aligns with current policy. This includes, but is not limited to:

• Ministerial Population Task Force^[48]
• National Strategy for Older People^[49]
• Rural Economy Action Group^[50]
• National Plan for Scotland's Islands^[51]
• Age, Home and Community Strategy^[52]
• Realising Scotland's Full Potential in a Digital World: A Digital Strategy for Scotland^[53]
• Scotland's Digital Health and Care Strategy^[54]
• A Scottish Government commitment to develop an AI strategy^[55]

62. In terms of aligning to the NPF, it could again be expected that projects under this proposed mission would contribute towards many of the national outcomes but the key impacts are likely to be on the following:

• We are healthy and active;
• We have a globally competitive, entrepreneurial, inclusive and sustainable economy;
• We are well educated, skilled and able to contribute to society;
• We have thriving and innovative businesses, with quality jobs and fair work for everyone;
• We are open, connected and make a positive contribution internationally.

63. Similar to the Place Mission, a variety of indicators will be used to show progress against the national outcomes suggested above. This is expected to better account for the multiple ways in which the Bank could invest in support of this mission. More information on measuring the Bank's performance can be found in section 5.