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Scotland’s National Investment Bank almost doubled its losses in the last financial year after being hit by the collapse of the company set up to administer the government’s flagship recycling scheme.
The Edinburgh-based bank, created to invest in sustainable businesses, had a pre-tax loss of £20.2mn in the year to March, from £11.2mn a year earlier, after suffering £17.8mn in “unrealised losses” mainly as a result of Circularity Scotland falling into administration, according to the bank’s annual report released on Wednesday.
The bank, established in 2020 with a mandate to fund projects that cut carbon emissions, reduce inequality and promote innovation, had invested £9mn in Circularity Scotland.
The company was set up to administer the government’s deposit recycling scheme (DRS) and to be funded by the drinks industry. It collapsed in June.
By the end of March, the bank had written down the value of the investment into Circularity Scotland by £4.5mn in recognition of the risk that the scheme would be delayed.
The scheme has since been postponed to at least October 2025 after the UK government refused to give the plans its full approval.
Scotland’s attempt to implement the DRS ahead of the rest of the UK sparked a constitutional fight with London, which claimed Edinburgh’s programme was out of line with proposals planned for elsewhere.
The delay has been a significant blow to Scottish first minister Humza Yousaf’s ambition of achieving a net-zero economy by 2045.
UK ministers had agreed to approve the scheme provided that the glass industry was excluded from its scope. This, they said, would ensure Edinburgh’s plans were compatible with those for the rest of the UK.
However, Scotland refused to change the policy and accused London of sabotaging the scheme.
The SNIB’s losses on the deposit return scheme are likely to be seized upon by its critics who say the bank’s government mandate could leave it open to unwise investment decisions.
“This is exactly the type of politically motivated investment which many, including myself, predicted would compromise SNIB’s investments due to the political pressure to back the Scottish government’s initiatives,” said Ross Brown, professor of entrepreneurship at St Andrews university.
But Al Denholm, the bank’s chief executive since April, said he was confident there had been no political interference in the lender’s decision-making.
“If you go back through our records, as I did when I joined, it was very clear that it was a very robust, independently led investment decision,” said Denholm, who previously held senior positions at investment companies including Aviva Investment Solutions and BlackRock.
“We are very disappointed by the outcome . . . but we stand by our investment process,” he added.
SNIB deployed £151.9mn in the year to March, up from £129.3mn the previous year — short of the £200mn it needs to allocate each year in order to meet its target to lend £2bn to businesses over a decade.
“It is going to take them a very long time to get up to speed,” said Stephen Hunsaker, a researcher at the UK in a Changing Europe think-tank.
