Scottish National Investment Bank 'not broken', boss says

Mr Denholm, who joined with 36 years of investment industry experience, found himself in the spotlight early in his tenure when it emerged the SNIB would make an £8 million loss on its investment in Circularity Scotland, the company set up to run the country’s now-defunct deposit return scheme. Circularity Scotland was funded by industry bodies but fell into administration when the Scottish Government effectively kicked the DRS into the long grass, having failed to secure an exemption from Westminster from the Internal Market Act that would have allowed it to proceed.

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Despite losing public money on the failed DRS, SNIB declared its investment processes were “robust” as it prepares to publish a new impact report which will reveal that more than 1,300 jobs are directly supported by the bank’s investments. A further 540 are underpinned by the “indirect and induced impacts” from its investments.

The full report, which will be published in the next few weeks, will also show £108m has been spent in the Scottish supply chain since the bank's launch, while its backing has supported the building of 585 homes available for mid-market rent in central Scotland.

Mr Denholm, who previously held senior investment roles with Aviva, Prudential, BlackRock, ING and Scottish Widows, joined the SNIB 14 months after the abrupt resignation of his predecessor, whose departure was initially shrouded in mystery because the bank did not elaborate on her reasons for leaving. Ms Mactaggart eventually released a statement citing personal reasons for her exit.

Asked if he had encountered any issues with morale at SNIB when he joined, Mr Denholm told The Herald: “In fact, no. There was some change [with his predecessor leaving] and that is unfortunate in any business. But I think the management team that I inherited had kept things going very well in the interim period before my appointment, and I have seen no reason whatsoever to change the team. Everyone is there because they deserve to be there. We have got really great subject-matter experts, really motivated people.

“You talked about morale. Our engagement surveys are beyond anything that I have ever seen in the private sector before, in the asset management sector. So, there are no morale issues whatsoever. I feel very lucky that I have not come into something that is broken at all. You can sometimes come into something and you have to make big changes and there has not been a need to do that.”

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Mr Denholm added: “Our board I personally think is a market-leading board. It is incredibly strong, bringing together expertise from all across the private and public sectors.”

The SNIB opened in November 2020 with a £2 billion war chest from the Scottish Government to invest in organisations engaged in three key “missions”: the drive to net zero, tackling “place-based” inequality, and harnessing innovation to help people flourish. It has so far deployed around £640m of capital in 35 investments, and grown its team to 81 people.

Mr Denholm highlighted as “encouraging” the amount of private sector investment that is being leveraged alongside SNIB’s own capital deployment, noting that this currently amounts to more than £1bn. Such private-sector players range from investors keen to back small and medium-sized companies as they “grow and scale” to larger institutional investors, which have joined bigger infrastructure deals.

Mr Denholm said: “There is a spectrum, but it is not the same people every time. There is a broad spectrum, which is good.

“One of the things I want to do as I look forward is to try and widen that and really maximise what we call our ‘crowding-in’ ratio. If we can take our £2bn over 10 years and encourage a multiple of that, that creates an even stronger economic benefit to Scotland.

“And that is one of our core objectives. It is set out, in fact, from the day we were founded in our missions to do exactly that. It is not like we are just on our own.”

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Mr Denholm added that the bank’s investor base was also widening out from Scotland to the rest of the UK. He said: “In fact, one of the things I perhaps bring is an element of awareness and connectivity into that wider base from my own career. I can’t guarantee that I will get other institutions to come alongside us, but we know which institutions to call on.

“In the next three years, for example, I would expect to widen that core investor crowding-in base quite significantly and that is something we are particularly focused on as an executive just now.”

Asked if any changes had been made to the bank’s investment strategy since he joined, Mr Denholm replied: “Clearly, we appointed a new chief investment officer [Mark Munro] who was already an employee. He was perhaps one my first appointees in June. That allowed him to do a quick refresh and look at the investment strategy.

“I looked at it from first principles with him… and came out with the view that, frankly, it was absolutely fine. There was no need to refocus or change direction. But we did do that review, just to check, rather than take it for granted. It was encouraging, and means we can just carry on doing the day job.”

Mr Denholm, who was appointed on a salary of £240,000, said he is enjoying the “big impact focus” of the SNIB, as well as its concentration on Scotland.

He said: “What I like about it is we have got this established team that is now three years old.

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“It was zero people three years ago. It is properly up and running now and making, I think, really good investments as well. We are really hitting our pace. I think of it as a flywheel. You get the flywheel to go, and then it becomes self-energising over time as well. It just keeps going. We are at that stage.”

Mr Denholm added: “There is good momentum. We are investing in some really interesting businesses that I think probably showcase the best of Scottish ingenuity, [and] the best of Scottish entrepreneurship as they are scaling into the next phase of their world, and that is across net zero, ScotWind supply chain, innovation, technology, [and] life sciences. Also, we are doing things to help in our way the housing crisis, for example, with our investment in mid-market homes for rent and making those available in the central belt.”