Investor Panel: Mobilising international capital to finance the transition to Net Zero

Challenges to investing in Scotland

Scotland can be a challenging investment destination

Investors tell us that doing business in Scotland, relative to many other places, poses some significant challenges:

• There are few visible opportunities for scale investment and where there are major projects they can be limited in breadth offering little opportunity for diversification of risk
• Planning decisions are slow and sit in the system for unacceptably long periods both generally in the United Kingdom and in Scotland specifically. Such delays and uncertainty involve additional risk and cost to investors
• The prevailing perception is that the Scottish Government and wider public sector
  is not supportive of business
• It is not apparent that the Scottish Government considers the impact of its actions on investment appetite from the outset
• It is not always clear to investors that the Scottish Government fully understands that they need to make a competitive return on their investment consistent with
  the risks
• Policy and regulation that seriously affects investment decisions and returns sometimes gets changed at short notice or with very little effective engagement
• There is significant potential to increase the consistency of skills and understanding within the Scottish Government and its agencies of private sector investment requirements to better inform upstream policy development and downstream
  policy implementation
• The Scottish Government has a plethora of objectives; it needs to determine its priorities and communicate them clearly through an investment lens.
• There is no clear, costed pipeline of opportunities similar to, for example,
  Western Australia
• Compared to other places such as Ireland, there is no coordinated mechanism for managing consistent, meaningful relationships between the Scottish Government, the public sector and existing and potential investors. Given the choice, there are other places investors will prioritise for their investment

Areas of recommendation

The transition to net zero, globally and domestically, requires massive public and private investment. Scotland's competitive advantages and ambitious policy commitments require a new and very different approach from that currently taken by the Government and its agencies if Scotland is to attract the scale of global capital needed to finance this activity.

As part of this exercise we have reviewed the practices of small countries and states which investors tell us are attractive to invest in. We set out a range of recommendations based on these, and other, observations which we believe should
be considered.

The wider political case needs to be made to create an acceptance that, to get to net zero and realise associated economic opportunities, external finance is essential and that the providers of this finance require a competitive reward for the risks that they are taking.

The political atmosphere needs to develop into a mature, mutually-respectful relationship with providers of finance.

To do this, the Scottish Government needs to define and then communicate its core priorities, increase its engagement with, and knowledge and understanding of, investors and develop more tightly-defined delivery plans for those priorities.

Our objective has been to make broad recommendations, which if accepted, will
allow the Scottish Government flexibility and scope around implementation. They
are grouped in three themes: strategic direction, investor engagement and delivery.