Scottish Taskforce for Green and Sustainable Financial Services Final Report: SG Response

Scottish Government’s Response to the Taskforce’s Recommendations

Maintaining the strength of the Scottish financial services sector

Recommendation 1 to FISGAD: There should be a clear role for the FiSGAD Board to provide connectivity between the SFE-led sector growth strategy and the Scottish Government, with a specific focus on the promotion of Scotland as a location for senior, decision-making roles and activity. Green and sustainable financial services should remain a key pillar of that strategy.

Response: The Scottish Government is committed to the work of the Financial Services Growth and Development Board, which is co-chaired by the First Minister and attended by the Deputy First Minister. The Board provides a forum for open and frank exchanges about the opportunities and challenges facing the Scottish Financial Services industry. We will continue to work with Scottish Financial Enterprise to share intelligence and ensure that the agendas and actions of the board focus on the growth, competitiveness, and success of the Scottish sector. We note that this includes the type of activity taking place, as well as its scale. Regular ministerial and senior official engagement with Scottish Financial Enterprise between FISGAD meetings will continue.

Recommendation 2 to Scottish Government: Scottish Government should review how it can incentivise more financial services institutions to set up or build businesses in and / or allocate capital to Scotland in preference to other UK cities and regions

Response: Our 2020 Inward Investment Plan (IIP) has a clear focus on attracting and delivering sustainable foreign direct investment (FDI) projects in Scotland, setting out an ambition for Scotland to be a leading destination for inward investment globally. The IIP identifies nine opportunity areas including financial services. We will continue to work with our enterprise agencies, including Scottish Enterprise to ensure the most appropriate resources are in place with strategically targeted incentives to support potential FDI projects as well as maximising opportunities and support through engagement with the UKG Office for Investment. Recommendations from the Investor Panel were published in November 2023, setting out how we can attract global capital investment to support the physical infrastructure needed for a just transition to net zero and the Scottish Government published its response alongside this. As set out in the Programme for Government 24/25, the Scottish Government will deliver a co-ordinated programme to attract investment in priority areas of net zero, housing, and infrastructure by implementing recommendations from the Investor Panel and aligning government and public bodies behind this approach. An early focus will be improving engagement with investors, strengthening our capacity and capability in delivery and exploring new funding mechanisms such as blended finance and guarantees. We will continue to monitor and evaluate performance in attracting good quality inward investment, including Financial Services, drawing on data and analysis from Scottish Enterprise’s annual results and independent industry recognised sources such as EY’s Annual Attractiveness Survey.

Recommendation 3 to Scottish Government: Scottish Government should ensure that the wider policy agenda is consistent with attracting senior roles to Scotland.

Response: Our Programme for Government is focussed on actions to progress our four priorities, which includes:

• Supporting a just transition to net zero that creates jobs and empowers communities and businesses, whilst taking action to help reduce our emissions and adapt to climate change.
• Attracting investment, driving innovation, supporting businesses large and small and developing our workforce to sustainably grow our economy

According to the latest EY Scotland Attractiveness Survey for Financial Services, Scotland continues to attract the highest number of UK financial services foreign direct investment projects outside of London, supporting the presence of many thousands of highly paid roles. We will continue to work with the Financial Services industry to collaborate on how we can nurture domestic talent, as well as attracting talent from elsewhere in the UK and wider world. In March 2024, the Scottish Government launched the first iteration of Scotland’s Migration Service. The service helps employers in Scotland navigate the UK’s immigration system so that they can meet their skills needs. The service also provides reception support to help people move to Scotland and successfully settle into their communities. Through our bilateral partnership agreement with the City of London Corporation, the Scottish Government will use our platform to promote Scotland’s attractiveness as a brilliant place to live, work and invest for financial services professionals.

Recommendation 4 to Scottish Government and SFE: Scottish Government should monitor developments at major financial institutions in Scotland, with a specific focus on senior roles, and ensure due value and regard is applied to maintaining and growing these roles in Scotland.

Response: The Scottish Government regularly engages with the key firms in the Scottish Financial Services ecosystem, at both official and ministerial level to understand their operations in Scotland and the issues they face operating here. We will work with Scottish Financial Enterprise to further understand the composition of roles in the Scottish Financial Services industry, agree how best to monitor the trends in senior role attraction to Scotland, as well as analysing prevailing global trends which will affect the composition of the sector going forward. We will present an annual update to FISGAD.

Through our bilateral partnership with the City of London Corporation, the Scottish Government will feed into specific sectoral initiatives, promotional campaigns and the Lord Mayor's engagement programmes to ensure that the advantages and benefits of the Scottish Financial Services offer are advanced and understood.

Recommendation 5 to Scottish Government: The SFE-led sector growth strategy already highlights the importance of retaining “our own domestic talent here in Scotland, as well as attracting talent from elsewhere in the world,” and the Taskforce would strongly encourage the Scottish and UK governments to engage with SFE, as a matter of urgency, on how best to achieve this.

Response: The Scottish Government will engage with the UK Government to ensure the needs of Scotland’s financial services industry are articulated and advanced.

Migration is a key lever in addressing Scotland’s demographic challenges and is crucial for our future economic and social wellbeing. Scotland needs access to international talent and skills at all levels of the economy, including within our vibrant financial services sector. Scotland must be able to attract people to come here without excessive barriers, and migration policy should support mobility, collaboration, and innovation.

Promoting Scotland as a Centre of Green and Sustainable Finance

Recommendation 7 to Scottish Government and Scottish Enterprise: The Scottish Government should disseminate the brand narrative and ensure its international trade and inward investment network is fully apprised of the Scottish green and sustainable finance opportunity.

Response: The Scottish Government’s international network aligns their annual joint business plans with Scottish Enterprise to the priorities set out in Scotland’s International Strategy, including economy, trade and investment and climate change, biodiversity, and renewable energy. Green and sustainable finance is an important aspect of how the international offices promote Scotland in pursuing a greener, fairer growing economy. The Scottish Government’s financial services team will host a series of teach-in sessions for Scotland’s international network on the opportunities of Green Financial Services. We will provide regular updates to the network about Scotland’s emerging pitch and offer in Green FS, and will work with colleagues in Scotland House, London and Scotland House, Brussels to promote the taskforce report and our ambition.

Recommendation 8 to Scottish Enterprise, SFE and Scottish Government: A “Team Scotland” approach should be adopted: an informal structure that brings key stakeholders together quarterly to collectively identify and target strategic opportunities for the brand narrative. Indicative activities might include:

• Updating financial services pages on Scottish Enterprise website
• Sharing messaging through Scottish Enterprise social media channels
• Aligning with a Brand Scotland annual theme
• Developing and sharing case studies
• Leveraging global moments and local events (e.g. New York Climate Week, COP, Ethical Finance Global)
• Managing an annual refresh of the brand statements/narrative

Response: We will support and amplify the Scottish Enterprise and Brand Scotland narrative where possible, including through ministerial platforms and Scotland’s international network.

Recommendation 11 to Scottish Government: The Scottish Government and its agencies should consistently embed the brand narrative across speeches, policy documents and external communications. Meetings and workshops should be arranged to help deliver this.

Response: The Scottish Government supports, and will seek to utilise, the brand narrative within relevant public-facing documents and activity, to ensure a consistent message of Scotland as the natural home for green and sustainable finance.

Recommendation 12 to SFE, GEFI and Scottish Government: Scotland should form part of the broader UK financial services proposition and messaging, with representation in future Lord Mayor’s overseas and regional visits.

Response: Scottish Government and the City of London Corporation (CoL) have a formal partnership agreement to help support and promote the financial services sectors of Scotland and the UK on a global platform. The Scottish Government and City of London are collaborating to amplify the opportunities Scotland can offer.

Recommendation 13 to FISGAD and SFE: A report mapping the Scottish financial services landscape, and sizing the green and sustainable finance market, should be commissioned to provide robust and dependable baseline numbers. This can help assess whether policy and associated activities are delivering positive results.

Response: Data is key to understanding the current and future needs and opportunities of the green and sustainable finance market, where the pinch points are and additionally where we have strength. Collaboration with SFE and FiSGAD members to understand trends better, including those identified within the sector Growth Strategy, will help inform SG ministers and support our shared ambition.

Recommendation 14 to GEFI, SFE and Scottish Government: The Scottish Government and financial services sector should establish a Scottish-based public–private entity to coordinate the delivery of the Taskforce recommendations, support the sector growth strategy and its green and sustainable finance targets, and promote Scotland as a financial centre specialising in green and sustainable finance.

Response: Scottish Government would welcome industry leadership to develop initiatives for supporting the Taskforce’s vision to establish Scotland as a leading Green and Sustainable Financial Services hub and to coordinate the delivery of Taskforce recommendations.

Future FISGAD meetings can be used to explore delivery models in further detail.

Recommendation 15 to Scottish Government: Scottish Government should write to GFANZ co-founders Mark Carney and Michael Bloomberg, reiterating the commitment of the Scottish finance industry to GFANZ and its various initiatives. It should highlight Scotland’s progress in fulfilling its aims and ask them to emphasise and leverage the Alliance’s connection to Glasgow and Scotland.

Response: Mark Carney supported the public launch of the Taskforce in February 2022, and its final report. Through FISGAD and elsewhere we will aim to stay in touch with GFANZ, noting its link to Scotland. The commitment of Scotland’s Financial Services sector to GFANZ aims will help strengthen these ties to Glasgow and Scotland.

Supporting green economy professional and financial services, with global reach is about building on our strengths in high-value tradable services sectors that have developed due to historical involvement in energy markets and traditional strengths in financial services; we will consider how Scottish Government can support future innovation and growth.

Recommendation 18 to Scottish Government and the City of London Corporation: As part of their partnership agreement, the Scottish Government and the City of London should discuss the potential for some of the City’s sustainable finance activities to be located in Scotland.

Response: Within the partnership agreement, the Scottish Government and the City of London Corporation agreed to put in place a framework for engagement activity going forward. This identified shared priorities in financial and professional services, including utilising our shared networks and expertise, and building a programme of work which can support positive outcomes for both the growth of the sector, wider investment and sustainable finance, including activity based in Scotland.

Recommendation 19 to Scottish Government and SFE: More focus should be placed on exploring opportunities to align messaging and activities and develop a co-ordinated approach to promoting the UK’s and Scotland’s sustainable finance offer. For example:

• Foster co-operation between the Scottish Government, Scottish financial institutions and the City of London Corporation in preparing for annual UN Climate Change Conferences (COP).
• Scottish Government, SFE and GEFI should work with the City of London Corporation to bring the Net Zero Summit to Glasgow, thereby promoting the “G” in GFANZ.
• Scottish Government and/or SFE should petition the Chair of the International Regulatory Strategy Group to ensure that Scotland has a voice in the Joint EU–UK Financial Regulatory Forum.
• Conferences and similar joint activities should be organised.

Response: The Scottish Government will engage with the City of London Corporation through our existing partnership agreement to consider how we can maximise Scotland's role within the Corporation’s international engagement and the Lord Mayor of London's promotional activities for the sector. This includes opportunities for collaboration to promote the green and sustainable finance agenda.

The Scottish Government will engage with the City of London and financial institutions to align net zero activity in preparation for COP 29 and other key milestones.

Scotland will host a Global Offshore Wind Investment Forum in Spring 2025 to bring together investors and developers to accelerate investment in Scotland’s offshore wind sector and associated infrastructure.

There is an opportunity for Industry and Government to work together on a petition on behalf of the Scottish Financial Services sector to request that Scotland be represented on the Joint EU-UK Financial Regulatory Forum.

Finding investment for green projects for Scotland

Recommendation 20 to Scottish Government: Priority should be given to scoping the nature, role, authority and skills of the Scottish Government teams involved in helping deliver investable projects for Scotland, most particularly the Investment Strategy and Delivery Unit.

Response: The Scottish Government is committed to responding to the recommendations from the Investor Panel in relation to enhancing our delivery capabilities. Work has already started to support the upskilling of Scottish Government officials with external investment experts providing inhouse training. As noted at Recommendation 2, the Programme for Government sets out how we will deliver a co-ordinated programme to attract investment into priority areas. The Programme for Government also sets out how we will deliver a national project pipeline of investment opportunities of the scale and impact of recent investments such as those by Sumitomo and at Ardersier, and that we will make Scotland more attractive for investment by launching an online investment portal in 2025.

Recommendation 21 to Scottish Government: A stronger policy framework is needed to make it attractive to invest in Scotland.

Response: Building on the recommendations of the Investor Panel, we are taking a new approach to how we and our agencies work with investors to attract the scale of global capital required to fully realise our economic potential and achieve our climate change ambitions. Our approach will seek to differentiate Scotland positively from other markets by being proactively 'investor-friendly' and using our size and devolved powers to act swiftly to become a globally competitive investment destination.

As the Green Industrial Strategy has set out, we have five opportunity areas:

1. Wind

2. Carbon Capture Utilisation and Storage

3. Green Economy Financial and Professional Services

4. Hydrogen

5. Building Clean Industries.

The Green Industrial Strategy is clear about the steps we need to take to help boost investment, which will in turn stimulate demand for Scottish Green Financial and Professional Business Services.

Recommendation 23 to Scottish Government: Given Scottish Government’s stated ambition of accessing debt capital markets and issuing (sub)sovereign debt. Some, or all, of this should take the form of green/sustainable bonds. This will help finance green projects and, more importantly, send an important message to international financial markets about Scotland’s commitment to green finance. This should be subject to due diligence and value-for-money assessments.

Response: The Scottish Government is conducting due diligence and VfM assessments around the issuance of a Scottish Bond, partially informed by the Investor Panel's recommendations. The Panel recommend the issuance of a Scottish Bond to allow the development of relationships with providers of debt and to provide a track record and credit rating.

Sustaining a world-class training and education offering

Recommendation 24 to SFE and Scottish Government: Scottish Government teams should engage with key stakeholders and identify practical and cost-effective ways to support upskilling and reskilling of financial services professionals in Scotland, in line with good practice identified internationally.

Response: The Scottish Government is ready to work with SFE, where applicable, to support a Skills Planning approach to the upskilling / reskilling of the financial and related professional services workforce which articulates labour market insights and will provide an evidence base to support decision-making around demand in these areas. We consider a clear demand-led skills evidence base will be vital to support the wider skills planning approach for Scotland in relation to green and sustainable finance.

Recommendation 27 to Scottish Government and SFE: Request that Universities Scotland engage with employers and professional bodies to determine how best to promote and deliver sustainability education – especially sustainable finance education – in Scottish universities.

Response: Although universities are autonomous institutions with responsibility for their own learning and teaching, the Scottish Government will continue to work with the Scottish Funding Council to ensure that public funding is allocated to the university sector in support of shared priorities.

New opportunities

Recommendation 29 to Scottish Government: Through its Private Investment in Natural Capital Programme, Scottish Government should continue to engage with the finance sector with a view to unlocking investment opportunities such as the UK Nature Impact Fund.

Response: The Private Investment in Natural Capital Programme is continuing to make progress in delivering our vision for a values-led high integrity market for responsible investment in natural capital. We will be publishing a Natural Capital Market Framework later in 2024 which will set actions to deliver our distinctive market vision, including testing blended finance approaches.

Recommendation 30 to Scottish Government: Scotland has the potential to develop a “Blue Carbon” market that builds on its maritime legacy and supports the Blue Economy Vision for Scotland. The Scottish Government could accelerate the development of a “Blue Carbon” standard to generate carbon credits from marine ecosystems along the Scottish coastline.

Response: Scottish Government welcomes the marine/blue-specific focus here. However, we believe the work that British Standards Institution (BSI) is doing on market standards could be incorporated into this recommendation and we will proactively collaborate with them to progress and avoid duplication.

Recommendation 31 to Scottish Government: Scottish Government should establish a cross-political party parliamentary group tasked with ensuring that once Great British Energy is established, its strategy aligns with related existing activities and programmes in Scotland, including those outlined in this report, and that brings maximum benefit to Scotland and to the rest of the UK.

Response: GB Energy policy is being developed at pace by UK Government and we will continue to work closely with UK Government to secure maximum benefit for Scotland.