Chairman of the Scottish National Investment Bank, Willie Watt joined us from a virtual Panmure House as a speaker at the second Hutton Series event on the 1st of December 2020.
One year on from the Hutton Series he gives us his reflections around investment and ‘Ranking Investments in Environmental, Social, Governance’ from our TEN KEY PRIORITIES, INNOVATIONS AND ACTIONS TO MITIGATE CLIMATE CRISIS
Investors today are increasingly focussing on ensuring that, beyond commercial returns, their investments also deliver tangible, positive social and environmental impacts. The Scottish National Investment Bank is a mission-led investor, and so for us ensuring that our investment delivers impact is crucial to achieving our missions.
We do not see impact and commercial investment as in competition with each other, and in fact consider them to be mutually reinforcing. This view is increasingly shared among private investors who recognise that a focus on impact can improve the resilience and success of their investments. The economic instability we have seen in recent years, particularly sharpened currently, further evidences the need for investors to act strategically and to invest in business and sector resilience.
Impact investing has evolved significantly in a short space of time. In previous years environmental, social and governance (ESG) factors were increasingly incorporated into investment decision-making. By its nature, however, ESG investing is somewhat defensive as it primarily seeks to ensure that adverse consequences of an investment are assessed, understood, and mitigated or offset; for this reason, it is often referred to as a ‘do no harm’ principle. On its own this approach may limit the potential of investors to maximise their impact or drive positive change.
Impact investment requires a more proactive approach, seeking to effect positive environmental or social outcomes through each investment. At the Scottish National Investment Bank, we are led by our missions – achieving net zero, tackling place-based inequality, and harnessing innovation – but also see further opportunities to deliver impact by promoting equality and improved working practices.
‘The economic instability we have seen in recent years, particularly sharpened currently, further evidences the need for investors to act strategically and to invest in business and sector resilience.’
Successfully delivering impact investment requires commitment from investors to establish and implement clear decision-making frameworks and defined key performance indicators. This is essential to provide clarity for investee businesses and to evidence their own impact. Intentionality and accountability are key to identifying the opportunities and enablers for impact, and then demonstrating progress.
It is my view that Scotland’s existing financial services expertise, and its opportunities for growth in key sectors that will support the transition to net zero, presents a clear opportunity to develop ourselves as a centre for impact investment. Developing and demonstrating impact expertise among our investment community, as well as our growing and scaling businesses, will build confidence among other investors and businesses to follow similar opportunities.
This will be crucial to addressing the challenges and opportunities that Scotland faces, such as the need to reduce and decarbonise our heat supply or to build the supply chains will require. In order to do so our innovative businesses will need investment to grow and to scale and demonstrating impact can be key to successfully attracting that capital to Scotland.
Join prominent impact investors and business leaders who are using impact capital to help to transform Scotland at the Scottish National Investment Bank Impact Investing Summit in Glasgow on 29 November. Visit: www.times-event.com/impactinvesting