Business leaders have made a series of recommendations to help Scotland transition to net zero after identifying ‘significant challenges’ to attracting investment for key infrastructure projects.
Investors believe the Scottish Government and wider public sector is ‘not supportive of business’, and have urged Holyrood to take a ‘very different approach’ to attract global capital.
More than 40 institutions, companies, advisers and individuals were consulted on how to turn strategic aspirations for a green economy into a tangible reality.
They held discussions with Scottish government leaders as well as economic support agencies, and drew up 31 recommendations to unlock the potential of net zero infrastructure development.
However, the experts observed that there are currently significant challenges with the way that government deals with the private sector, and criticised investment plans as a ‘wish list’.
They are demanding far greater rigour in the form of a ‘real pipeline’ of infrastructure projects that are ‘properly costed, shaped and prioritised’.
They said: “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.”
In terms of government reforms, the panel was clear. It thought that there needed to be a better approach to planning and regulation.
It said: “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.”
“Policy and regulation that seriously affects investment decisions and returns sometimes gets changed at short notice or with very little effective engagement.”
The panelists included Angus Macpherson (Co-Chair), chief executive, Noble & Co, Alexandra Basirov, head of EMEA ESG finance & solutions, Bank of America, Shane Corstorphine, ex-CFO, Skyscanner and scale up consultant, and Baroness Margaret Ford, chair of Gatwick Airport.
The panel, formed in December 2022, was charged with looking at general ways to support key investment into infrastructure projects but also for specific projects such as ScotWind, and Hydrogen and Heat in Buildings.
ScotWind is a globally-significant offshore wind opportunity offering development rights for 20 projects with an associated £70 billion of expenditure but faces challenges with strong global competition for resources and investment. Changed market conditions also resulted in no bids being submitted for offshore wind in the most recent UK Contract for Difference (CfD) auction.
However, one of the recommendations was that Holyrood could use existing devolved powers to issue debt to ‘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’.
The panel added that ‘Scotland’s intimacy and devolved powers could allow it to differentiate itself positively from other markets by being proactively ‘investor-friendly’. This could be achieved by being more agile in decision making and adopting proven practices of small states which have attracted investment at scale’.
The panel’s methodology also consisted of looking at two different jurisdictions which are regarded as performing well on attracting mobile capital, to see what lessons there might be for Scotland. They were Western Australia and the Republic of Ireland. Feedback was also received on practices followed in Portugal, Canada, Singapore and Norway.
First Minister Humza Yousaf said: “Opportunity is a defining mission for my government, and the Scottish Government’s focus is on delivering a just transition to net zero while seizing on the massive economic opportunities that represents. I am grateful to Angus Macpherson and the Panel for their work in setting out these recommendations.
“Delivering the physical infrastructure necessary for a just transition to net zero will require public and private capital investment on an unprecedented scale over many years, at a time when public finances are extremely stretched. Attracting more investment to Scotland has the potential to generate significant economic growth and create new jobs and industries right across the country.
“While our small size could be seen as challenging by some, I welcome the Panel’s assessment that we can use it to our advantage by acting nimbly and decisively – to differentiate ourselves from other markets. To make the most of this, it is clear that we must work with industry to understand investor priorities and consider these in policy development.”
To access the report visit here.