2. The Importance of Mission-Oriented Investment in Supporting the Economic Recovery from the 2020 Coronavirus (COVID-19) Crisis
Supporting and Shaping Economic Recovery
15. The Scottish and UK Governments have introduced a range of support measures for businesses impacted by COVID-19. The Scottish Government has further set out a four-step plan to respond, reset, restart, and recover. While the initial economic shock of COVID-19 is expected to be shorter term than the long-term nature of the Bank's mission-oriented investment objectives, the Bank is expected to play a key role in supporting Scotland's recovery by delivering patient and sustained investment in Scotland's businesses and communities.
16. The immediate impacts of COVID-19 underline the need for the Bank and support the adoption of a mission-oriented investment approach. The climate emergency, place-based opportunity and demographic change represent compelling challenges now more than ever. The Bank is uniquely placed to work towards addressing these challenges through providing patient capital to support long-term economic growth in tandem with the business community and public sector partners. Therefore, the Bank's mission-oriented approach provides a unique opportunity to influence the direction of economic recovery in the long-term interests of the people of Scotland.
17. The Scottish Government established the Advisory Group on Economic Recovery (the Advisory Group) to provide expert and independent advice on Scotland's economic recovery from COVID-19. Its work has set out the impacts of the shock to the economy and the scale of the challenge ahead. The Advisory Group's recommendations have highlighted both the need for the Bank and support for its intended approach to crowd-in investment to deliver long-term outcomes. Amongst its key findings, it concluded that the "crisis accelerates the need for an investment institution at the heart of the Scottish economic landscape" and that it is imperative that the Bank opens in 2020. The Group also highlighted that there is significant appetite from Scotland's investment community to co-invest with the Bank.
18. There are themes which link to Scottish Government recovery policy, the Advisory Group's report and the Bank's proposed missions. These are:
- Green recovery;
- Equality and wellbeing; and
- Increased economic robustness and resilience.
19. A green recovery is one that is aligned to Scotland's ambitious climate change targets. A recast Climate Change Plan update (due at the end of 2020) will account for the challenges brought by COVID-19 and reflect the opportunities for a green recovery, as well as showing how Scotland can meet its emissions reductions targets.
20. The published and ongoing advice from the Committee on Climate Change, the Just Transition Commissionand the Advisory Group on Economic Recovery will also be invaluable for informing Scotland's green recovery. The latter has concluded that green economic recovery is central to economic recovery overall.
21. Through the proposed Net Zero Mission for the Bank - achieving a Just Transition to net zero carbon emissions by 2045 - the Bank's investment will act as a catalyst to build the momentum needed to reduce emissions and support the Just Transition to a greener economy. The IIPP recognises this and has set out the necessity for public financial institutions to provide patient finance towards a green recovery.
Equality and Wellbeing
22. COVID-19 has served to highlight and exacerbate a range of inequalities in Scotland and across the world. The Bank's mission-oriented approach means that it will not seek to invest purely for financial gain, but will pursue growth in a way which addresses inequality and increases wellbeing in an inclusive way. The Bank's Place Mission will specifically direct it to invest in places and regeneration to reduce inequality, and improve opportunities and outcomes for people and communities.
23. The Bank also has ancillary objects to specifically promote inclusive economic growth, social wellbeing and environmental wellbeing, and to advance equality and non-discrimination (more information in section 4).
24. Performance against the Bank's missions will also be measured with reference to the NPF which inherently focuses on creating a more successful country with opportunities for all of Scotland to flourish through increased wellbeing, and sustainable and inclusive economic growth. This should also be considered alongside global standards for impact investment measurement relating to wellbeing, including the United Nations Principles for Responsible Investment (UN PRI) and the United Nations Sustainable Development Goals (UN SDG). More information on measuring performance is found in section 5.
Increased Economic Robustness and Resilience
25. COVID-19 has highlighted the world's dependence on global supply chains and interactions. The Advisory Group has recommended a need to build readiness in preparation for potential risks and future disruptions facing our economy and society. The need to support businesses and sectors which Scotland has, or can develop, a competitive advantage is referenced. The Group has specifically highlighted that "by crowding-in investment, the Bank will be in a unique position to help deliver a robust and resilient wellbeing economy".
26. The Bank will seek to shape and create future markets, by crowding in private capital to invest alongside the Bank's public capital to maximise the impact of its activity to address the grand challenges faced by Scotland. In doing so, the Bank will be contributing to building a more robust and resilient domestic economy for Scotland.
27. An understanding of how the Bank could increase resilience becomes clearer when we consider the rationale for each of the proposed missions, and the potential investment opportunities arising from them. As such, explanations on how the proposed missions could support resilience are found in section 3 below.
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