This Mission Report is the Scottish National Investment Bank’s response to the missions that have been set for it.
The Bank's Vision
The Mission Report explains how the Bank will assess and report on the mission impacts of its investments.
By focusing on the mission impacts of the Bank’s investment activity, this will allow the Bank’s investments to address persistent grand challenges faced by Scotland.
The Bank’s vision is to provide investment to support growth in the Scottish economy, and the Bank will do this by investing in innovation and accelerating the move to a net zero emissions, high tech, connected, globally competitive and inclusive economy.
Investment Strategy Core Principles
In addition to delivering mission impacts, the core principles of our investment strategy are:
- The Bank will seek to invest in projects or businesses requiring £1 million or more of investment to support their growth or development
- The Bank will be a patient investor, providing long dated investment to businesses and projects connected with Scotland
- The Bank will seek to generate commercial returns on its investments to support the Bank becoming financially self-sustaining
- In the longer term, it is intended that both profit from the Bank’s investment activities and repaid capital will be reinvested in businesses and projects across Scotland to create a perpetual investment fund for Scotland
- The Bank will seek to attract private sector funds to co-invest alongside our public sector capital
The Bank's Missions
The Bank’s missions have been designed to address the long term, persistent challenges facing Scotland. Strong support was received for these missions and their ability to address the key economic and social ‘grand challenges’ facing Scotland.
In setting the Bank’s missions, it was recognised that the mission impact returns from the Bank’s investments will be delivered over the longer term.
How the Bank Will Deliver its Missions
The Bank will use its investments to support the delivery of its missions.
Investment activity will focus on delivering a commercial investment return the Bank’s shareholder on behalf of the people of Scotland, alongside social and environmental returns, and mission impacts.
The Bank will work with other private and public sector partners and will seek to attract private sector funds to co-invest alongside its public capital wherever it can. This will maximise mission impacts and accelerate investment activity in the Scottish economy.
What Could the Bank Invest in?
The Bank has identified a number of areas, projects and businesses it expect to consider investing in over the coming year.
The following graphics capture these potential opportunities.
Assessing Investment Opportunities
The alignment of an investment opportunity to our missions is the initial filter applied when assessing a new investment opportunity.
The Bank is an development investment bank, providing commercial investment in debt or equity to businesses and projects connected to Scotland.
The Bank is not able to provide grants or sub-commercial funding, which will continue to be delivered by central government and the development agencies.
Over time the Bank will seek to build a diverse portfolio, providing the investment required to support the delivery of all three missions across the whole of Scotland.
The Bank’s investment process has been designed to follow investment industry best practice, and is in line with other development investment banks.
Measuring the Bank's Impact
The Bank intends to develop best in class investment impact assessment and reporting to ensure it demonstrates the delivery of its missions over time.
The Bank will anchor this reporting on the World Bank’s International Finance Corporation (IFC) ‘Operating Principles for Impact Management’ (which are set out in more detail below), and the IRIS+ system of impact measurement, developed by the Global Impact Investing Network (GIIN).
In addition, the Bank will seek to report the impacts of its missions in line with the Scottish National Performance Framework. These frameworks are all closely aligned with the United Nations’ Sustainable Development Goals’.
The Bank is required to report on the non-financial performance of its investment portfolio annually, and will do so in the Annual Report.
Over time the Bank will develop this reporting further in line with evolving industry best practice. The Bank will use a balanced scorecard approach to underpin its performance reporting, to cover both financial and non-financial impacts.
Using the International Finance Corporation Principles
The International Finance Corporation (IFC) has been at the forefront of impact investment for decades. In developing its Operating Principles for Impact Management (IFC Principles) its goal was to establish a common discipline around the management and reporting of impact investment.
The IFC Principles will provide the basis on which the Bank will establish and implement its investment impact assessment and reporting to evidence the delivery of its missions over the long term.
Define strategic impact objective(s), consistent with the investment strategy.
Manage strategic impact on a portfolio basis.
Establish the Manager’s contribution to the achievement of impact.
Assess the expected impact of each investment, based on a systematic approach.
Assess, address, monitor, and manage potential negative impacts of each investment.
Monitor the progress of each investment in achieving impact against expectations and respond appropriately.
Conduct exits considering the effect on sustained impact.
Review, document, and improve decisions and processes based on the achievement of impact and lessons learned.
Publicly disclose alignment with the Principles and provide regular independent verification of the alignment.
Using the IRIS+ Standards
The Bank will base the measurement of its mission impacts on the IRIS+ System Standards.
These standards are already being used by leading impact investors to measure, manage and optimise investment impact.
The IRIS+ system is based on
four core characteristics, which are set out below.
Noting that impact investment is underpinned by the Bank’s desire to contribute to measurable social, environmental or economic benefit through our investments.
2. Use Evidence and Impact Data in Investment Design
To ensure the Bank’s investment delivers the intended impacts, the IRIS+ system recognises that these impacts must be incorporated into all of the Bank’s investments.
3. Manage Impact Performance
To deliver impact, the IRIS+ system recognises that this requires communication of performance at the investment level to support the assessment of impact for the investor.
4. Contribute to the Growth of the Industry
The IRIS+ system encourages investors with credible impact investing practices to share their insights and experiences where possible to enable others to learn how investment can contribute to social
and environmental benefit.