What is impact investment?
Impact investing is a fairly recent term. The Global Impact Investing Network (GIIN) defines impact investments as “investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return”.
Impact investments have several common features:
- An intention to create positive social and/or environmental outcomes, alongside generating returns.
- Contributing to solutions in a way that is additional, for example, through the increasing the depth, duration, or scale of outcomes.
- Clear data reporting systems to measure and manage impact that links the intention of the investment to change in outcomes.
Collaboration and stakeholder engagement are key to successful impact investing. Impact investing can be applied across various asset classes, making previously neglected areas more attractive and financially viable.
The concept has gained momentum in recent years as people increasingly realise the pressing need for action on the social and environmental challenges of our time. Impact investing provides a way to mobilise capital for positive change, and to channel resources towards solutions that go beyond what is possible with traditional investing.
Enabling impact through our investments
As an impact investor, the Bank goes beyond a more traditional ESG risk management approach to being focussed on delivering a positive impact while seeking a commercial return from our investments.
As our portfolio and knowledge of the Scottish investment landscape has grown, we have evolved our Investment Strategy to prioritise investment in sectors that we believe can create the most significant progress towards achieving our missions. This in turn has allowed us to shape and refine our approach to impact.
Over time, we expect our investment portfolio to enable impact in four distinct ways:
- Delivery of our missions. In delivering our three defined investment missions, we integrate key ESG and ethical investment principles to amplify our portfolio-level, positive impact in the Scottish ecosystem:
- The promotion of a diverse and inclusive workforce through high-quality employment aligned to the ‘Fair Work First Principles’.
- Increasing business understanding around carbon emissions and climate risk.
- Creating equality of investment opportunity for people who are marginalised, minoritised, or under-represented
The Bank has developed quantified, long-term impact ambition targets for each of its missions. These allow us to track progress and hold ourselves to account on some of the key impacts we want to achieve within each mission, and are designed to work alongside the other levers we use to enable positive social and environmental change.
Our impact model
The model below summarises our approach, with ESG themes as a foundation onto which mission impact is built. We also look to bring co-investment capital in alongside our own wherever possible, as it extends the reach of investment that is generating social and environmental outcomes. And, as well as working alongside other investors, the Bank engages broadly across its ecosystem of stakeholders to contribute to positive systemic change that will in turn enable further mission-aligned impacts.
You can read more about our impact ambitions and approach to impact investment, as well as examples of the businesses and projects we invest in to enable impacts, in our annual Impact Report.
For further detail on our impact frameworks and requirements.<link to our frameworks page>