The updated strategy is the first to be spearheaded by new chief executive David Ritchie and focuses on the Bank’s commercial investment remit and long-term financial stability. 

The investor outlines new priorities under each of its three missions, based on its experiences to date and the opportunities it sees within the market and its own deal pipeline. It has expanded its innovation mission, which previously targeted technology and life science innovation, to be sector agnostic.

Its focus moving forward will be on businesses with demonstrated growth and a differentiated position in the market, and it will be looking at how AI is effectively embedded within companies where it’s integral to their service or product.  

Housing commitment

To date, the Bank’s investments have supported the delivery of nearly 1,000 new homes. Its strategy is based on developing strong partnerships to unlock stalled sites and support small-to-medium-sized housebuilders.

The Bank will also be looking at increasing the depth of the housing supply chain and crowding-in more capital to support Scottish development, as it has done with fund investments in Octopus Capital and L&G, both of which included crowding-in ratios. This means that for every pound the Bank invests, a further pound or more will be invested in Scotland by the funds.

Aligned to its net zero mission, the Bank is looking at opportunities in energy security and stabilisation, as demonstrated by its recent acquisition of a minority stake in the Devilla Battery Energy Storage System near Kincardine. It will continue to direct its capital toward addressing bottlenecks in the renewable energy supply chain, with grid infrastructure and energy systems being a focus. 

In line with its ambition to manage third-party capital, the Bank also aims to utilise its expertise as a fund manager. It intends to design a fund to support innovative businesses emerging from Scottish universities in the coming year. This would build upon the £100m the Bank has already invested in university derived businesses. 

David Ritchie, chief executive of the Bank, said: “The Bank is entering its next phase of maturity. This is an opportunity for us to learn from our first five years and sharpen our focus on the commercial returns that will ultimately deliver long-term societal impact.

“While our risk appetite remains unchanged, our new strategy ensures we also stay grounded in our commercial fundamentals. Our vision is to become a perpetual fund that delivers impact and generates returns that can be reinvested, harnessing the potential of emerging opportunities for future generations.”

Publication of this new strategy is the latest of several key milestones in the Bank’s history. It celebrated its five-year anniversary last November and has committed more than £1.2bn in capital, with £1.9bn invested alongside.

The Bank has admitted to some portfolio failures, which it says are an expected part of investment, particularly for a development bank that is mandated to take on higher risk. The Bank has reviewed and identified lessons to be learnt from failed assets, some of which are reflected in the investment strategy.

Ritchie, who was appointed chief executive in January this year, added: “Whether you’re a business trying to secure investment or a family trying to balance a budget, we are all feeling the impacts of our challenging macroeconomic climate. Investor appetite has tightened as global conditions continue to shift.

“Volatility is now the defining feature of the market. While we have seen these issues impact Scottish businesses, there are also clear opportunities, and our strategic direction is calibrated to capitalise on this potential, channel more investment into Scotland, and support the development of a thriving economy.”