SCVO and SES briefing to the Scottish Parliament

September 2019

Summary

This briefing sets out both the Scottish Council for Voluntary Organisation’s (SCVO) and Social Enterprise Scotland’s (SES) support for the Scottish National Investment Bank Bill – on the condition that this will include a clear vision and objects directed towards an investment-led, just transition to a zero-carbon economy that accelerates positive environmental and social impacts– such as wellbeing, citizen centred services and equality – ahead of economic growth.

An open approach to the Bank’s positioning, day-to-day running and lending is critical for the Bank to deliver on a commitment to being mission led and public purpose driven. This includes drawing on the expertise of the social enterprise and voluntary sectors in a transparent , participatory and accountable manner to form the Bank’s advisory group, deciding missions and adopting a balanced scorecard for integrating non-financial returns with financial measures in terms of investment performance.

The Bank must provide opportunities for all of Scotland to flourish and this includes lending – where appropriate – to the social enterprise and voluntary sectors, which are an integral part of the Scottish economy.Without a change to the commercial and private sector focus of the Bank’s objects, associated communications and supporting documentation – such as the Policy Memorandum – the value and role of the sector as a major economic partner is undermined.

Our position

SCVO and SES are working in partnership because we believe it is imperative that a national investment bank works for the whole of Scotland. We have identified the following priority areas where we are calling for changes to protect the Bank from contributing to business as usual.

1. As a bare minimum, the agreed vision for the Scottish National Investment Bank, asset out in the Implementation Plan, must be enshrined in the legislation.

We welcome the Committee’s attention to differences in wording in the Bill and Implementation Plan, including the absence of the Scottish Government’s vision for the Bank – previously agreed and outlined in the Bank’s Implementation Plan. It stated that “The Committee remains to be persuaded that the language of the Bill fully matches the ambitions for SNIB to be transformative.”

Defining the purpose and vision of the Bank in the Bill will be crucial to avoiding mission-creep, keeping its public purpose-driven, long term, mission investment-led approach to the Scottish economy on track, and securing the view that profit is not always financial and can mean social and environmental benefits too. The Scottish Government’s

Implementation Plan said the Bank’s vision was to provide investment that would transform Scotland by ‘ accelerating the move to a low carbon, high-tech, connected, globally competitive and inclusive economy’. This vision is absent from the Bill.

Our vision for the Bank is an investment-led transition to a zero-carbon and inclusive economy that accelerates positive social and environmental impact – such as wellbeing, citizen centred services and equality – ahead of economic growth. We therefore recommend the inclusion of the Scottish Government’s vision for the Bank in the Bill itself.

2. The Bank’s main and ancillary objects must have a stronger focus on socio-economic and environmental outcomes as opposed to the current commercial focus.

We welcome the Scottish Government’s acknowledgement of the Committee’s recommendations to strengthen the language of the Bill to contribute to advancing equality, as per paragraph 70 of the Revised EQIA.

Reference to social and environmental impact are missing from the Bill and the Bank’s objects, with “investing in inclusive and sustainable economic growth” provided as a catch-all term. The Bank’s main object is outlined as ‘giving financial assistance to commercial activities’; there is no mention of the socio-economic and environmental challenges.

The ancillary objects of the Bank also include ‘promoting and developing the activities of enterprises, where lack of financial investment is holding back economically viable commercial activity.’ This is, or could be, very different to funding mission-led enterprises that will deliver lower than market rate commercial returns because they are focused on maximising the positive societal, inclusive, environmental and external benefits of their mission.

3. Non-financial returns must be anchored in the Scottish National Investment Bank Bill alongside financial measures.

We support the anchoring of non-financial returns in the Bill as per paragraph 68 of the Scottish Government’s Revised EQIA.

With such a prominent focus on ‘ commercially viable activities’ in the Bill and no mention of public benefit or a mission-led approach in the Bank’s objects, we have concerns that the initial ambition for the Bank could become diluted with public benefit and mission led criteria side-lined in the Bill seemingly as optional asides.

The point of a mission-led organisation is that its performance cannot and should not be measured just by its own profitability or other financial metrics. While monitoring and evaluation frameworks that capture the wider benefits and spillovers generated by the Bank’s investments may appear in other places, this needs to be referenced in the Bill to secure their importance and longevity, as recommended by the Committee.

4. The narrow ‘private sectorand commercially focused narrative around the Bank must be shifted to ascribe value to the social enterprise and voluntary sector as economic partners.

A priority must be to make sure that a national investment bank for Scotland maximises the impact, contributions and values of Scotland’s social enterprise and voluntary sectors in developing a distinct, national financial institution, one that provides equality of opportunity and allows organisations in these sectors to secure long term, patient equity and loan investment finance – where appropriate – as a willing partner.

We are pleased to see clarification from the Scottish Government that confirms the use of the phrase ‘ lending solely to the private sector’ in the associated Policy Memorandum does not rule out voluntary sector bodies, community interest companies, social enterprises and cooperatives from seeking finance. This should be clarified further in future drafting and promotional and communication activities relating to the Bank.

5. The Bank’s mission led investment process, governance and lending criteria should reflect the values of openness and participation. This will include drawing on the experiences and expertise of the social enterprise and voluntary sectors.

The Scottish National Investment Bank has been included in the Scottish Government’s Open Government Partnership Plan ( in Commitment 1 for 2018 to 2020 ). This international OGP standard will enable civil society stakeholders, Ministers and the Bank to work together and deliver processes for supporting the Commitment. This will include the Bank selecting Missions, and preparing investment and lending criteria that are open, collaborative, inclusive and transparent. In following these principles, the Bank will deliver on the joint Scottish Government and civil society Commitment 1 in the Scottish OGP Plan, and this also reflects the values of Scotland’s National Performance Framework.

The Advisory Group is a key stakeholder group, and civil society in Scotland sees a need for participation from across sectors to reflect expertise and experience from all walks of life.

This brings wide societal relevance and participation. It is particularly important for a new institution that has a chance to forge a new path, with an inclusive, sustainable and transparent contribution by a state investment financial institution to both the society, environment and economy of Scotland.

Developing the Missions of the Bank is another area of activity where civil society sees a role for citizens, stakeholders and Ministers to work together and ensure the Bank focuses on social and environmental issues. Civil society in Scotland is looking to the Bank for a mission-oriented framework that supports the transformational changes needed across Scotland.

Finally, we ask also for the Bank to work in collaboration with others to identify and tackle the key societal challenges facing us today in Scotland, by making long term patient equity and loan investments in all types of legal entity including social enterprises, charities and limited companies.

Anna Fowlie, Chief Executive, SCVO, anna.fowlie@scvo.org.uk

Chris Martin, Chief Executive, Social Enterprise Scotland, chris.martin@socialenterprise.scot