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

Recommendations

Recommendations: strategic direction

1. The current public sector landscape around attracting mobile capital needs to be simplified and given clear focus

2. The Scottish Government should review the balance between its narrowly focussed regulatory roles and processes, as well as those of its agencies and local government, against the need to attract investment at scale to achieve the wider strategic goal of achieving net zero

3. National and local government need to be disciplined and clear about their role in infrastructure projects; for example whether this is as a funder, a co-investor, or a planning authority

4. Net zero and sector priorities need to be clearly articulated in Government strategies in a way which shows they can be delivered

5. The concept of subsidiarity needs to be reviewed in the context of delivering infrastructure critical to the transition to net zero. Where projects can be designed or delivered nationally at scale, this should be the default option

6. The Scottish Government's interaction with regulators, including those at the UK level, should be strengthened to expedite the delivery of major infrastructure projects

Recommendations: investor engagement

7. The most appropriate providers of finance and expertise need to be identified and segmented. A serious, professional and consistent relationship management approach needs to be taken to these institutions

8. Although it will involve additional costs, Scotland's profile could be significantly raised in the international capital markets by using existing devolved powers
to issue debt. This will provide a motivation for regular engagement by investors and an opportunity to market Scotland's investment story. It would also allow
the development of relationships with providers of debt, a track record and
credit rating

9. The current investment pipeline is too diffuse. A pipeline needs to be formed of projects that are properly costed, shaped and prioritised. It needs to be a real pipeline, not a wish list

10. Once relationships have been established, an annual meeting should be held to engage with these investors around the opportunities in this pipeline. Feedback from this event should result in regular refinement of the pipeline

11. ScotWind has the scale to attract global investor interest. A state sponsored conference, at the right time, should be considered to attract key international investors to Scotland. This would also serve to raise the profile of the broader investment landscape

12. Investors and market participants are concerned that the Scottish Government and the Crown Estate Scotland may find it difficult to secure all of the published commitments from developers and a continued focus will be required to ensure commitments are realised

Recommendations: delivery

13. The revised Scottish Government's investment objectives and associated pipeline should dictate the amount, type and focus of resources

14. An exercise needs to be undertaken to fully understand the financial and human resource currently committed across the Scottish Government and its agencies
to attracting mobile capital and delivering core investment priorities

15. The roles and responsibilities of organisations and teams should be reviewed and made clear and an assessment of their capacity and expertise to unlock investment undertaken. Changes are likely to be required to meet the scale of
the delivery challenge

16. A mechanism needs to be put in place whereby the implications for investors and investor sentiment are taken into consideration when policy is formulated or legislation developed across all of Scottish Government. This also needs to apply to how policy is delivered

17. The implementation of the policy within the National Planning Framework 4 of a requirement for planning authorities to give significant weight to the global climate emergency when considering development proposals should be monitored to see if it results in a faster, more certain planning process for development projects such as those associated with ScotWind

18. Building on the recommendations of the UK Electricity Networks Commissioner Report, the Scottish Government should make representations to the UK Government on the development of a master plan for the implementation of the grid expansion necessary to meet the needs of ScotWind

19. A plan needs to be developed for the scaling up of a floating offshore wind pilot scheme to assist in developing other sites at scale. This can leverage learning from the innovation projects emerging from the existing INTOG (Innovation and Targeted Oil & Gas) leasing round to start a practical conversation on the floating offshore wind supply chain opportunity for Scotland

20. The Scottish Government should evaluate the economic viability of pipeline exports of green hydrogen, generated by ScotWind projects, to Europe, relative
to green hydrogen created in the Mediterranean rim

21. Public financial resources and policy should focus on the use of green hydrogen
as an enabler for industrial decarbonisation

22. Public sector connection to heat grids should be mandatory to provide the right demand signal for private investment into heat sources. Extending this regulation to new commercial real estate and large-scale housing development should
be accelerated

23. Private investment into heat sources can be accelerated by creating a viable margin for district heating. This can be facilitated by reducing upfront costs, such as planning, and focusing subsidies on the market for renewable heat

24. For institutional investment at scale to be attracted to the residential housing sector to help finance its transition to net zero, greater clarity as to the stability and quantum of returns is required

25. The Scottish Government should consider the recommendations of the Offshore Wind Champion and implement those that are within its devolved powers, including ensuring there is adequate resource for the Marine Directorate of Scottish Government and NatureScot to meet responsibilities in ScotWind

26. The Scottish Government should improve engagement between the newly established Offshore Wind Directorate and the industry to ensure a focus on maximising opportunities around offshore wind operations and maintenance

27. The Scottish National Investment Bank should be able to provide guarantees and underwriting at scale in line with the capabilities of many other investment or development banks

28. The Scottish National Investment Bank should invest pre-emptively in the supply chain for ScotWind, complementing the tax incentives offered by the Green
Free Ports

29. Public leadership needs to continue to upskill to be able to act as effective counterparties to major investors and must commit to continually deepening this knowledge and understanding. These skills need to be learned from those with proven expertise and who embody international best practice

30. Attracting mobile capital is a specialist area and the Scottish Government does not have the resources to build every capability to an adequate standard itself. Using external commercial specialists might prove to be a better value proposition

31. A culture needs to develop that is rigorously focused on outputs, not inputs or on process management