 Good morning, and welcome to the seventh meeting of 2021 of the Economy and Fair Work Committee. Our first item of business is a decision to take item 3, which is consideration of the evidence in private, our member's content. That's great, thank you. Our business this morning is an evidence session on financing the transition to net zero for SMEs. The session is intended to give us a snapshot of the SME experience journey to net zero and the financial help and support that's available. Our witnesses are all joining us remotely today. I'd like to thank the first panel very much for taking the time to speak to us this morning. I'd like to welcome Joe Chidley, co-founder of Beauty Kitchen, Michael Cusack, head of sustainability and business transformation, ACS clothing, John Ferguson, managing director of PI Polymer Recycling Ltd, Paul O'Keefe, partner at Thomas Tosh, and Murray Whittaker, director of projects at Whittaker Engineering. I welcome you all to the committee this morning. We look forward to hearing from you all about your business transition to net zero, and we'd like to hear what you are hoping for to come out of COP26. Some of the challenges that you are facing and thoughts on access to financial support to facilitate the transition to net zero. A few weeks ago, at the committee, we heard from FSB and Scottish Enterprise, who talked about the difficulties for some businesses of making the transition to net zero, and talked about the pressures that Covid recovery was also placing on businesses. I'd like to ask Murray Whittaker. Mr Whittaker, your business is very well established. You've been operating, I think, for three decades, and I'm interested in how prepared you feel for the transition to net zero and what your business has done to make it fit for the future, and what kind of support you've had to enable that. Good morning. Thank you. It's a good question. I think that the density of journey is part of all businesses, as a sector. It's a little bit complicated with us serving mainly the oil and gas industry in the north-east of Scotland, but that doesn't mean to say that individual businesses can't make real effort to reduce their carbon footprint at a local level and not at an individual business. Stets, we've laid, in production of a wood chip and pellet boiler system. We have 4,000 metres covered facilities. That's a very large area of covered workshops, which, conventionally, were heated using a diesel-based product to remove them all on to wood chip boilers. That was a granted process through RHI payments. That has worked really well. Things like that, LED lighting, planting of trees and modern changes to manufacturing processes are heavily involved with wire art, additive manufacture, AM, additive manufacture processes. Those will all be key parts of our energy transition, using less energy to create the same products, making them more sustainable manufacturing environment. That also passes on to our end-users, clients and customers, so they can share in that net zero journey also. It's a combined factor. To help it, certainly more grants would be appreciated, but legislation will also come as well, so those will be key parts of that journey. Mr Whittaker, what made the business decide to take these steps? You say that there could be more funding available and there could be regulatory incentives to make you do the change. Why did Whittaker decide to start on that journey now? We feel that it's a key part of our messaging as a business. It's also incumbent on all businesses to take responsibility for the environment that we live in, so companies should individually look to reduce it. Also, the financial element going to pellet boilers, for example, was a huge cost saving overall. RHI was a very attractive thing to do the grants work, so it was a financial and environmental benefit on that particular example. We're also getting increased pressure from our clients and customers as you'll be aware that energy transition in the energy sector, and traditionally the oil and gas sector, is massive, with large international oil companies moving in a direction towards renewables, so they're asking that their entire supply chain moves with them. We've always moved with our clients. We're 38 years in trading, so when the clients ask us to go, we will go also in that direction ahead. We're very lucky in the north-east of Scotland. South of Aberdeen, we have a good base to make that energy transition with a 50-year history in oil and gas, and we have some really exciting projects in the north-east to move that forward, in the energy transition zone, and also aggressive hydrogen targets within the city of Aberdeen and Shire. I think we're in a good place for that. Thank you. Can I turn to Michael Cusack from ACS Clothing? Michael, you're in quite a different situation because you're a new business that's been created to try and meet some of the challenges of fast fashion and the textile industry. Do you want to say a bit about how easy it was or how difficult it was to establish your business and what support and incentives were available for you? It's actually been relatively easy from a psychological point of view. If we hadn't embraced sustainability, we wouldn't be in existence today. Because of that, it's helped to motivate us more. We're looking at entering new markets in terms of clothing rental, in terms of baby wear, women's wear, maternity wear, menswear, formal and informal. It's just growing and growing. On top of that, we're also looking at taking the traditional skills associated with cleaning and repairing garments and bringing them into another new market called clothing renewal. It's been an easy journey for us. It was an easy decision. I have to be honest with you. I'm saying that we're focused purely in the sustainability side, every aspect of it. Not just environmental. Net zero is very, very important to us. It will be a massive badge of honour. We're already a carbon neutral business. In the journey, there's a social side as well. We embrace both parts of it. On the social side, we are a disability confident leader. We are developing a talent pipeline of disadvantaged job seekers that will help the business to grow, which is absolutely fundamental. We're an SQA centre. We've got three qualifications that we deliver that are core to the business. In addition to that, we've gone through third-party accreditation and things like the circular economy working with the Ellen MacArthur Foundation. We use their model called circulatics. In addition to that, we've worked with an international partner called Climate Partner, who has helped us to get to a carbon neutral status. In addition to that, we're working through B Corp. We've finished the questionnaire. We're about to submit it. B Corp certifications are critical to us as well. Many investors are very interested in it. It's drawn them to us. From the point of view, one of the things is that we get closer to net zero. My experience is three times as hard every step that we take. Funding is critical, but we need new technologies. We need ways to help us. We're embracing fantastic partnerships. Our landlord, our facility, is helping us to develop a solar roof. We're also looking at wind turbines. That's being done in partnership. The other thing is our biodiversity bubble. We're looking at rewilding the site. We've already got our beehives at Warnmury. We're looking at a lot of other things like a bird sanctuary, butterfly gardens. We're looking at a polypropylene tunnel, cronorwn fruit and veg, and with the Warnmury making that circular. There's lots of small innovative things that we're looking at. We're also partnering with local voluntary organisations. That's critical. It's not just about the company, it's about the community as well. We're also trying to attract a men's shed on site to help us and to help them. All of those things are critical. Rainwater harvesting, recycling water. We're also looking at liquid carbon dioxide in terms of cleaning and moving away from nasty chemicals like perc. We're never short, but it's a city. Every step that we take is getting more and more difficult. We recognise the need for more investment in technology to get us there. There's no shortage of help. The other thing is that we've received a lot of very useful funding over the last couple of years that's really helped us from a wide variety of sources. For example, Scottish Enterprise. In the UK, we get a fantastic relationship with Zero Waste Scotland as well. Even organisations like Home Energy Scotland are absolutely fantastic because during lockdown, we actually helped trainer staff on various workshops around water use, energy use at home, embracing electric vehicles. By the way, recently, again, we've got funding to establish eight electric vehicle charging pods. We've got two electric vehicles as carpool. We're actually promoting electric vehicles with staff, so there's a lot of things like that. What I would say to you is the big thing for us is the totality of it. It's very organic. If you wanted me to put a nice plan for you, scheduled out, it doesn't work like that. We try things. If they don't work out, we move on to the next thing and we keep on trying things. What we're finding is, by reaching out to different organisations, we're constantly learning the way that other organisations are approaching. We're finding that that helps us greater than maybe bringing in a big top international consultancy. We do find, for example, Scottish Enterprise. It was them that actually embarked us on this circular economy route. They went and said, do you realise that your model is circular and in truth, although it's common sense, we didn't. That enlightened us and just small things like that. Other organisations, we find, we really get motivated with organisations like Vibes, the Vibes award. We got a best practice award recently. We find that fantastic, even the model and listening to what other companies are doing in a way that's benchmarking. That's where we got the bees from. We won it back in 2019. We found that most of the other winners had bees apart from us. That was a priority for us. We love sustainability. Ops, sorry. Thank you, Mr Cusack. A short follow-up question. You've described a really positive picture of the level of support that you are getting from Government agencies. You are in a very competitive market because you're involved in fashion and textiles. How is the business able to compete with an industry that is known for an industry that has a reputation for over-reliance on cheap products and cheaper textiles? How are you able to compete in an international market on that? I think that because of our heritage in Main's Formalware, we were already in the market. There are lots of entrepreneurial start-up companies in the higher market that are looking, who are not as interested in cleaning and repairing garments, and they are looking for a partner to do it. We are in the right place at the right time. What I would say to you is, in terms of competition, if we really are wanting a more sustainable fashion industry, we really need to change our approach. We need to look at things that are maybe a bit far out there. For example, elimination of VAT from sustainable fashion products and services would help us a lot. It's not just about our companies, it's about changing the direction of an industry and helping consumers to make better decisions. Fast fashion is cheap. There's a variety there. The fashion is constantly changing. It meets a lot of people's emotional and economic desires. If we want to change that, we need to be more competitive. There is a cost to being a living wage provider. There is a cost to looking after the welfare of your staff. Those are the right things to do. I'm not saying that we would always fully embrace this and take it even further, but there is a cost to that. That cost, when you're competing against global businesses, that might not be about the bush, that are using slave labour, that the welfare of the staff is not looking after. They might be using child labour. They might be prison workers working in different organisations. Do we have the transparency in the supply chain? No, we don't. The thing about it is that we are all asking for a level playing field. There is a struggle. We want to change this huge oil tanker of an industry, very slowly moving towards more sustainable outlets such as Rental, Renewal and Close Swapping. In order to do that, we ask that we help to level the playing field. That's helpful. Gordon MacDonald is followed by Colin Smyth. Thank you very much, convener. I'd like to hear from a couple of the other panellists about what steps they've taken to reduce their carbon footprint. I'll go to Joe from Beauty Kitchen. Hi, everyone. Morning, Jo. We can hear you. Can you hear me? Yes, we can. Okay, great. That's lovely. Hi, my name is Jo Chidley. I'm the co-founder of Beauty Kitchen in Return of Ill-Repeat. When we look at our continent zero, you've obviously got Scope 1, Scope 2 and Scope 3. Scope 1 is, for us, we have had a good level of support. That is through Zero Way Scotland and energy efficiency. What they have done is they have given us an energy consultant who has done a report for our operations. We will reduce our carbon footprint. When I say carbon footprint, I'm talking about greenhouse gases as a whole, not just carbon dioxide, by 96 per cent. We can do that quite quickly over the next two years. Scope 1, for us, was quite straightforward. Yes, there's a financial contribution. However, there's interest-free loans and there is a variety of cash-back options depending on what we implement to change things like our heating. When it comes to Scope 2, we've already done that because we're on a renewable energy supply, which we've done as part of our ethics as a business. Scope 3 is where the big impact can come. We're a small, independent, fast-growing business, but Scope 3 is throughout the supply chain. Just to build on Michael's point, when you are a circular business, your business is driven by having net zero, not just as one of your targets, but to actually look after the people, the planet and the profit of your business through purpose. What happens is that there are 6 million businesses in the UK of which 4 million of them are SMEs. 99 per cent of them work in a linear economic model where they take resources, make stuff and dispose of it. The small percentage, such as Michael's business and myself, our businesses have a circular business model. Coming back to his point, having a level playing field and having positiveness around a circular business model will not only help to drive net zero across Scotland and SMEs' businesses, but it becomes more cost efficient as a business as well. However, we need help to access finance, we need help to understand role models, case studies and governments supporting this. The net zero piece, our business can be a shining light. We will be officially net zero by 2025. At the moment, we are carbon neutral and the reason for that is due to carbon offsets. Through the processes that we will play in Scope 1 and Scope 3, we will ensure that we are net zero by 2025. Thank you very much. Is there Paul from Thomas Tosh? Hi, good morning everybody. Thomas Tosh is a business that is based in a building that was built towards the end of the 19th century. As a result, we are having to deal with the issues around that building. When we developed from 2008, we developed the business, we started small steps like getting the slash windows to open again so that we could have natural vent. We replaced the boiler, then we took part in a resource-sufficient Scotland programme where we could get a consultant in to assess our energy usage. On the back of that, we took out an energy savings trust plan, which is backed by the Scottish Government. We got insulation done in our building and LED lighting. The building itself is the attraction for our customers. It is a nice space, but it has its own particular problems. One of the key issues for us going forward is that we are oil dependent. This is not so unusual for a rural area that here at home I need to use oil as well for heating. That is going to become an issue going forward for us. In terms of where finance and funding comes from, the energy savings trust plan was very beneficial. We are coming to the end of that now. Some of the issues around it might include the payback period for an energy savings loan trust. The payback was that you had to show a saving over 20 years. If we are moving away from oil in the future, would the payback need to be over a longer period? The surveys that we have seen say that 52 per cent of all SMEs have not taken any action towards decarbonising their business. What steps need to be taken to persuade companies of the commercial importance of adapting to net zero and the negative consequences of not doing so? John Ferguson My businesses are fundamentally industrial ecology businesses. I came in through this as an environmentalist and partnered with business people because we are going to make this transition and they have to be viable businesses in the first instance. My whole raison d'etre is to try to address these issues. I would like to answer the question about fundamentally focusing on how we change systems. My core company Ecoideen Ltd provides the strategic services to the bin group at the bin eco park. I was very encouraged by the previous speakers and certainly by Michael. The wide range of diverse elements that come into the challenge. For example, in the eco park, we are developing a private grid that will help to decarbonise the bin group's own business. It will give us the catalytic gravity to attract businesses to the eco park on the promise of table price, low carbon energy. We look at water capture, we look at EV and we are looking across the sector working with the resource management association that we helped to establish. In fact, we are working on a sector plan for the resource management sector. The bin group's eco park is effectively a demonstrator of key elements of how we will decarbonise the service sector that services virtually every business because all businesses produce waste. In terms of pie polymer, a new start-up is pre-revenue but is about to move into early revenue. We have three projects there that are fundamentally looking at what is the failure point within the post-consumer plastic system that results in significant landfill incineration and future plastics ending up in the wrong place like our oceans. We have designed systems that integrate both system change or allow system change through the clever integration of technology. Some of those are novel innovations that we have brought to market and others are simply connecting things better to allow the system to change. My focus is on assisting other businesses to make that transition because central to our purpose is to be a low carbon business anyway. We are very focused, I have to say, on being a low carbon business but our major business model is to deploy technologies and systems to allow other sectors to decarbonise by demonstrating both systems like private grids, for example, our private grid is driven by wind, solar or battery systems will be deploying power control systems and smart energy management systems. We are trying to connect our project which is about 16 kilometres outside Perth across a smart energy city project to assist that transition, which is probably a 10-year transition. In recognition that this transition to electrification will really stress the national grid and we need to deploy these smart, small private grids to assist in that transition. I would simply say that our core ethos will certainly address our own footprint at every level of our operation and our main modus is to try and help other companies and other systems to decarbonise by focusing on these technology system integrations. Michael, you touched upon the fact that you want the UK Government to look at the VAT system and maybe change towards focusing on decarbonisation. Is there any other fiscal changes you would like to take place on companies to decarbonise? Maybe even introduce a carbon tax on companies that are not embracing sustainability. That would help. As I said, the big thing about it is doing the right thing is healthy, is fantastic for us, is growing the business. However, for us to get to the next level and to challenge organisations like ASOS, we will need a lot more investment and we will need to compete with them in terms of economies of scale. However, if we will continue the social policies that we have in our organisation, they are expensive. They are worth it, they are an investment. However, when we are competing with the ASOSs of the world, they have benefits over us because they are able to produce things that are more cheap. I would maybe look at a carbon tax. What I would say to you is that the big thing about SMEs, if you do not mind me saying, is that we have been an easy decision on a lot of the things that we are doing. There is a return on it. There is a return on embracing sustainability. By taking waste out of the business, the nature of waste, if you can reduce the waste that you are producing, it reduces your operational costs. We reduced our waste management costs by 70 per cent within a year. Just using some simple lean techniques and putting a focus on it, you can save money by doing this. It is not just a cost, it is an investment. The other thing as well that in our organisation, I remember dot com really well and I remember some organisations that do not exist anymore. What I would say to you is that I believe that sustainability is similar to dot com. If you do not embrace us, you will not exist going forward. The future economy of Scotland will be based on sustainability and how well we can embrace it and how well it will make us competitive. That is how I feel about it and our experiences. I would shout it out loud. There is so much benefit in that. It is a massive opportunity. Thank you very much, convener, and good morning to the panel. I am very conscious that it is probably fair to say that the businesses that we have here today are engaged on that journey to net zero, but, as Gordon highlighted, that may not be the case for every business, particularly over the past two years when the survival has obviously been a real challenge. Can I pick up on the issue of support? Michael, you raised some ideas for extra support around VAT and also a carbon tax. Can I ask the other panelist, I was to ask each of you, is there enough support, in particular finance out there, to support you on that journey? If there was one other thing that you could get from Government or elsewhere to support you, what would that be? Maybe I can start with them. I will go through the order on my list here. Maybe Joe at Beauty Kitchen. Hi there. Definitely access to finance. We are a self-funded business. We do not have any external investment. We have had a variety of grant support. However, we have been turned down for many different types of finance, whether that be loans from the bank or other grant funding. The reason for that is our reusable packaging system. We have our beauty brand, but we also have reusable packaging systems. I am talking to a predominantly Scottish audience. It is like Iron Brew for beauty where you return your empties to the point of purchase and we wash those empties and refill them and send them back out. However, we do not just do that for Beauty Kitchen, we do that for large businesses such as Unilever, which is the third biggest personal care business in the world. There are 190 billion pieces of single-use plastic that are used every year in the beauty industry. The opportunity is huge. However, our reusable packaging system from a financial perspective is looked at in the same way and costs a lot more. It is not classed as an asset so there has to be some changes in the ways of thinking so that young businesses like ours can drive that opportunity from here in Scotland not just to generate jobs but to generate net zero across the country by accessing finance because they see our reusable way of doing things and the packaging in particular in a different way financially. That's the same question of John. Thank you, Colin. I'm going to echo much of what Joe has said in terms of the access to funding. The PyPolymer company is a recent startup. It's a micro SME and we have a very astute finance director, a very good business planner, a very good pitch deck but it just takes time and being able to more quickly identify the appropriate funding routes in a very broad brush approach. It's very helpful to see green tech groups and green backer groups and so on where interested investors gather because that saves you a lot of time going through introductory meetings and so on. Fast track to identifying appropriate funding I would say that a lot of micro SMEs really struggle with the extensive support that's out there in the UK, smart grants and such like the capacity of putting together decent applications, so a little bit of assistance, I think. Identify if the idea is worth the time and then give them the assistance to get the application and get the grants out if that's appropriate. My final point would be about procurement. We have a massive public procurement system which needs to strategically mobilise to ensure that we're supporting the systems, the producers and the concepts that will make this transition happen and use much procurement, if you like. We talk about smart everything else. I'd love to see smart procurement waking up to its obligations and its responsibilities and assisting this transition. Thank you. Can I just follow up on that point, John? The previous point you made there about was it easy for you to know where to go to get support? Was that a struggle in itself? There are organisations out there with so many different funding mechanisms. Was it an easy place to find out what's available? Is the barrier what's available or is it knowing where to go to get support? I think it's more knowing where to go. I think there's an enormous amount of support out there. There's enormous funds trying to mobilise into this very broad sustainability space for circular economy renewables and various other elements to transition to net zero. I think that there's money there. It's just about being focused and recognising that a lot of very small companies have brilliant ideas but they don't have capacity. How do you give them that assistance to get them into that position of momentum growing a business and creating revenue from there so that they can bring in additional staff? My biggest issue as a start-up is the capacity to deliver on all our ideas. We've got tremendous experience. I've been doing this for a pragmatic front-line environmentalist for 30-odd years. I came into business 10 years ago. It's been a steep learning curve to be able to translate good environmental ideas into good business. The opportunity for good business doing the right things is enormous and there's a lot of money that will deploy into that space. It's just how do we help the good idea companies to grow? Can I ask what additional support you've got? First of all, is there sufficient support there? What additional support would benefit your company? The support that we've got was really useful in terms of the loans. If a programme of loans was available and easy to access in a sort of one-stop shop through Zero Waste Scotland that would be very helpful. A whole package of advice around that would be good as well. There are some problems because you may get some advice on net zero but that may conflict with other things that are going on at the moment for example the pandemic. We have to keep our windows open what happens to all that energy that is lost. There may be a need for more comprehensive thinking of how the net zero fits into other issues that small business have to face and how Zero Waste Scotland could think across those issues. The loan payback period as well we had to show that the savings that we are making deliver savings within 20 years. If there are big transitions that are needed that equation may need to change. That sort of thing can be destructive. We had to close our business for two and a half weeks to get many of those changes done so some sort of consideration around the disruption that they can cause. Also a small business like ours we could be front running other small businesses like the trades people that support us the plumbers, the joiners the plasterers but their information and support can be given to them and say look can we do this and then they say I'm not sure I've never come across that. So some sort of package for the trades people out there that supports small businesses like ourselves. That's very helpful Paul. Better broadband and thumb hill might be a good thing as well. I'm very much on to that issue Paul don't worry but can I come back to your business Paul is obviously quite unique I mean that I confess I've eaten cakes I've been to film nights but your focus is very much about bringing people physically into your building so it's not something you can replace on lines. Is that a particular challenge particularly in the rural area given the fact that it is very much you're basically asking people to travel to your business in an area where obviously public transport is largely not an option. Do you see that as a barrier to that overall carbon footprint for the business? If we looked along the whole chain from all down the supply chain to how our customers get to us there are going to be a lot of issues around that. There are no electric charging points that I know of in Thornhill as you say rural transport is an issue for us it's not easy to come to us just spend a little bit of time with us and go away you would have to block out hours and as interesting as my business is I don't think that people can hang around their whole day. Rural transport is definitely part of the equation. Sorry Mr Smith I'll have to move on with questions sorry to cut you off there but if I pass over to Colin Beattie Thank you. SMEs come in all shapes and sizes and I'm sure they have very diverse needs in terms of types of finance and so on and yet when I look at a pre Covid snapshot of how SMEs actually used finance or sourced finance you've got business credit cards and charge cards at the top of the list followed by overdrafts it sounds fairly pedestrian is there enough knowledge within the SME sector of the different diverse funding sources that can be tapped into and I might ask John Ferguson to comment on that Thank you very much Colin I couldn't answer with you because as you say it's an incredibly diverse community and if you look at the definition that goes up to hundreds of employees I think any SME who is focused on his business will understand the potential funding landscape but they'll bring different competencies so when I started I left the Scottish Environment Protection Agency 12 years ago and one of the first things I did was a diploma in project finance because I knew that I was going to have to learn a whole different skills that I spent 20 or plus years working in the public sector so I think also how do you make sure that SMEs are adequately skilled and trained so are there quick courses that explain project finance the difference between non-recourse finance and bank finance because most SMEs simply don't have access to bank debt not in the early stages of their business at least so I think it's about access to available information and training maybe some of the Scottish Enterprise do actually and if you've got an account office in the Scottish Enterprise a lot of SMEs probably struggle because they don't get that foundation right so it's a really good question it's not easily answered but it is all about the individual companies taking responsibility and getting access to the training that they require to understand finance and that also brings in to play where is the appropriate sources of that finance thank you I can ask Paul to comment on a slight twist on that yes about diversity of supply of financial products and the knowledge of SMEs that exist and how to tap into them is there sufficient funding coming through in these diverse lines and now we're in post Covid perhaps you could comment on the debt level that SMEs are currently bearing the debt level will be an issue for example my business has taken on a bounce back loan so I know the banks are meant to be in the finance institutions are meant to disregard that or look at that mutually it shouldn't affect say our overdraft facility or other lines but certainly it would be a consideration I'm sure for small businesses and would be for us to take on more debt so that is going to have to be a bouncing thing if we can see a payback over time yep we could but certainly many small businesses will be sensitive to taking on more debt if they've taken out for example bounce back loans or CDRs so I think that is definitely an issue that will be an issue in any loan programme or financing programme Moray perhaps I can ask you to comment on post Covid debt levels and the funding available within the SME sector for progressing down the route to net zero absolutely I'll do my best I think that what you said at the start described it quite quietly there are different levels of SME we are up to 128 people and we generally do quite well and have a good turnover certainly at the millions and how do you cover that between the range of our businesses so we have talked about debt levels and what to carry debt we used civil loan throughout the pandemic which we didn't have to touch but it was a huge cushion and fortunately the way it seems to be is the bigger you are and sometimes the more support you get and I know it feels like that from some of my friends who have smaller SMEs the range and availability pass it to loans grants and are challenging we out-managed enterprise for the three years without their support we wouldn't run out of the absolutely excellent all the price on loans but the smaller companies before out-management status can find it quite challenging so the different funding models available and access to these different models all the way through was that easy to negotiate and navigate some of the some of the politics is local, all businesses are local and the requirements from our business quite different from us up in Aberdeen how we transition and we talk about what does transition look like for us we want to be part and will be part of the building for renewables that supply the clean electricity to all these businesses to the development and building of wind farm to the loans infrastructure and type of investment that we require to support our business is massively different we need things like superports to help us and others to build supply to create this green future literally the power that comes to your plug because we are in the energy sector it's such a different range it's a difficult question to answer but availability of loans at all levels is very important but also advice on what is the right type of loan Scottish Investment Bank could be a key part of that there are many ways of which it could be funded but again it could go to friends in your state thank you can I turn to Joe you indicated I think that you were self funding and I wonder if you come into the group that self funds through using business cards overdrafts and so on to keep the business going and to establish it and also did you benefit from Covid loans and how is that debt level going to impact on you so we are self funded which is through a variety of different measures so we use invoice financing because we our business we have a product to sell so it's then when you're dealing with large retailers that have very long times in paying you back we've got a supply chain where B Corp certification so we're the highest scoring B Corp in personal care in Europe and what comes with that is paying our suppliers within 30 days that's one of the things that we stand up against so invoice for us it's about cash flow and it's about cash flow management because as a fast growing business so as an SME we started trading in 2014 and we are classed as fast growing as continued year on year which is great we have accessed the sea bills loan so we do have debt towards the business however because we are a B Corp certified business as directors of the business we are employees so we don't take anything from the business everything goes back in so I think it depends on your business model and how you approach your business in terms of what is right for us it's always working capital because we're growing so fast we need to be able to pay our supply chain to be able to grow and increase our business and it's that cash is king at every moment we don't use overdrafts we do use business credit cards however that's used on a it's paid off on a monthly basis so it just gives us those extra days to be able to pay for certain things it's all wrapped in our cash flow for us I know that's quite different for maybe much smaller micro SMEs like sold traders and otherwise but for us it's all about working capital Joe could I just ask you about something you did say there you say you pay your suppliers within 30 days as a matter of policy but you mentioned that selling to retailers and so on they perhaps didn't fall into that category how long on average does it take for you to be paid 90 days 90 days that's quite a long time for a business quite a disparity between the 30 and the 90 is that universal? it's dealing with larger blue chip linear businesses they don't be certified they don't necessarily pay the real living wage their ethics are quite different in the way that they work their business everything is about bottom line profit not about the triple bottom line as in looking after everything and they can squeeze smaller businesses I won't be the only one sitting here saying that I imagine if you asked 100 SMEs some of them are even at 120 days so we've actually negotiated to 90 it sounds like you're providing the big retailers with the working capital I'll have to move on sometimes that's what it feels like Alexander Burnett followed by Maggie Chapman thank you convener good morning panel carbon auditing is still a developing field and your clearly run successful businesses and understand the importance of measure to manage so can I just ask how you've gone about measuring your carbon footprint and I suppose what difficulties do you see and what suggestions to improve it and if I could just ask but I know we're limited for time John followed by Joe followed by Murray so John first thank you very much Alexander great question one of the things we've called for consistency in evaluation methodologies and training consistency because if we don't use consistent methods we can't aggregate all of the carbon quantifications to get any meaningful sense of how well we're managing the transition and secondly training because I ran a team with carbon modellers and life cycle assessment specialists and when you get down to the specific systems which is what you're doing when you get into an individual business because Michael for example and Joe and others will be measuring their business which is very specific in terms of what they do then the variances are enormous in terms of how you quantify different things and what you actually do in your business so trying to get some uniformity in methodology and getting companies trained on that so that's the two things I would say it may be slightly different models for different applications but within groups and sectors you should have some consistency and also self-useful and certainly rolling out training so that the models are applied properly because Thank you Thank you very informative Joe Just building on John's point consistency within not just a company but within an industry is really important so we use science-based targets but when it comes to measuring your output there are sales and marketing companies that have appeared out of nowhere that are selling their way of measuring carbon footprint which is not necessarily based on science-based targets so I just want to build on on John's point the more consistency that we have what would be great and I don't know how this is possible but for example when it comes to life cycle analysis or any information that a business has if we take beauty kitchen we have already done that for our business and I feed that into the beauty industry through our industry associations help other businesses to look at our data and share that data but having that open source and transparency with data that you've paid for yourself as a business that's a really brave thing for businesses to do but encouraging that openness and collaboration would then help with that consistency because sustainable businesses are already measuring that are they giving those measurements out as data points to their industry thank you very much Murray I think that can be answered quite simply we are in the oil and gas off-road oil and gas energy sector have been for 38 years probably one of the most regulated industries in the world right alongside nuclear also we stand by and appreciate bureaucracy in the point of ISO accreditation and legislation I think that legislation should guide this and there should be an ISO or a industry standard type of accreditation for carbon measurement and capture so we have over 7 ISOs in different manufacturing techniques styles to do it really means we have high pressure dangers with training equipment so things we make incorrectly unfortunately the manager would go to jail if it was made incorrectly that's the law so if you apply those types of standards to environmental so we were audited by third party bodies you know from the same brand name, lodge, register, dnv those type bodies if they were to do audits that you had an accreditation and you were third party independently audited on your carbon output we would have another accreditation to stand beside the ones behind me right now and I could say we are carbon credited at a level, you know, one to three or to a certain point in the companies you can't meet that standard it then becomes a differentiator and for example our clients will only deal with us that's super major oil companies if we have at least seven of these ISO accreditations in quality management product control and you would also apply the same so I would welcome a system put in place at a mandatory or industry involved it could say we could be credited against the carbon standard there are a little bit more currently there's a standard called pass 2060 which is issued by BSI and we're looking into that just now to give us an official accreditation but it's more widely appreciated or accepted I think it would be a great deal across all sectors thank you that very much builds on what John was saying as you're a supplier in a sector of production I just wondered did you feel you get enough support from a tier one companies who you supply to I don't really know if it's the responsibility of the tier one companies to do that we are a private entity like all the people on this panel we have to go with the industry directors if our clients ask it we do it it's really that simple we have to serve into that market so if they insist we'll do it yes more support would be appreciated but I think I can answer that quite clearly because we need the work my call comes thank you very much thank you thank you very much good morning to the panel and thank you for your contribution so far it's been very interesting I want to just pick up on a point that Joe made earlier around the potential and opportunities for sharing information for sharing awareness raising role models and ask how we create across the SME sector acknowledging that it is a very very very diverse set of organisations and companies how we create a culture of zero carbon net zero adoption thinking about not only the help and support that is in place whether that's financial or otherwise but also in terms of the role models that awareness raising and is there a role for things like knowledge transfer and what I suppose is associated to that can we make better use of digital technologies Michael talked about the need for new technologies all the time can we use technology to help us actually create a culture across the sector I don't know Joe if you want to say a little bit more about that and then I'll ask John and Michael thanks technology is something that gives access to businesses but it's just taking that step back to recognise that we're all citizens so a lot of the times people talk about consumers and actually that's no longer the case we're all citizens that have a responsibility and we have a responsibility to the planet and to ourselves and with collaboration what happens is we need to bring together academics and knowledge transfer we need to bring citizens as in consumers, customers which is every one of us and we have to bring businesses and policy makers together now we all know that that's a really really hard thing to do but I think the more we talk about it and the more we embrace that the more diverse the conversation will be and today is a prime example of that when it comes to technology you can't believe that it's sunny and wishy when it comes to technology it's that's driven by people so the one thing that I'm always really cautious of is that you use technology to leverage the knowledge that you are creating through that collaboration rather than the technology driving those decisions and that's a really hard balance to make we all know that there's been lots of people talking about different apps and ways to engage and I'm not saying you wouldn't want to leverage that but you wouldn't want that to be the driving force people have to be the driving force and changing that mindset first off is the most important thing in my eyes Thank you Joe John, the same question I absolutely echo everything Joe said there I think the only thing I would add really one is an endorsement one is I think it works best within sectors because you tend to look at your peers and if there's leadership within a peer group it tends to create a transition and movement so I think it's best to try and get those knowledge exchanges those standards those communications of information and best practice within sectors and I think you need to link those by identifying champions within each sector and link that to the benefits of that company because then other people will think well I should be doing that for my company and you create a mass transition and it's a lot less amorphous if it's done within sectors because fundamentally that's where you look for your main competition and I've been endorsed the point to me it's about we're all businesses that in one way or another service consumers and consumption we have to create the behaviour that's consuming too much and there's a lot of focus now on what we do about consumption is a big question I don't think we can make this transition and just keep on with that same level and model of consumption so we really need to focus on changing everybody's behaviour and that's a pretty big challenge thank you thanks John and Michael I agree with John and Joe what I would build on is let's not talk about consumers let's talk about users usership the other thing that I would say is we've put a big focus on the next generation we're working with schools and colleges and universities and making them more aware about our industry the evils of our industry and the hope in our industry and we've got a major drive we're organising eight conferences sustainability conferences our company we're partnering with the different universities all the different bodies and also lots of charities and other companies involved in fashion and I think we need more of us people coming together for the greater good and targeting young people and getting them to embedding these sustainable practices in them at a young age and that will give us the hope for the future they will demand sustainability going forward The Federation of Small Businesses told this committee I'm not sure that businesses can be in survival mode and also make the transition to substantial decarbonisation I just do not think that they can do it and if they can they'll need extensive public support obviously we've had a very difficult many months, a couple of years with all that's gone on in terms of the pandemic and I just really wanted to ask how the pandemic has impacted on your plans for decarbonisation whether it's impacted at all or whether it's made it a more of a priority or how to say it's impacted on it and if I could go to Paul first and then maybe to Joe Yeah, certainly Covid has been a priority for the business in terms of just operationally our whole focus focused on the safety of our customers and our staff and that has meant that the issues around carbon have fallen a bit to the wayside in fact going back to that point where some of the things that we may have introduced we are advised that maybe we should get a destratifier pushed down warm into the main cafe area deep customers are comfortable or how does that work in an environment where you need to make sure that you're properly ventilated so there's unintended consequences so I think if the financing was in place that was sustainable was seen as match it I'll bounce back learning could be compartmentalised away from any financing to do with carbon we could definitely think about that Okay, thank you Andrew Hi there, with regard to the Covid backdrop 90% of our turnover going into Covid was in bricks and mortar retail so we had to do risk our business quite significantly by placing a focus on e-commerce both direct to consumer from beauty kitchen but also through other e-tailers but that's helped us come out stronger from Covid that hasn't placed any different strategy on our decarbonisation we still had the same focus on that because we knew that by implementing the energy efficiency particularly within scope 1 was saving us going into the winter because it was reducing our energy costs fair, the energy reduction in our bills if you like hasn't necessarily been the same as the investment that we've had to put in to get those energy reductions but they will pay back within the next two years and we just re-prioritised the decarbonisation for us is at the forefront of driving in future proofing our business that's the way we've gone into it being decarbonisation as innovation for our business rather than a cumbersome something that's holding us back Thank you very much for that I mean really following on to that the citizen advice report of May of earlier this year found that 52% of SMEs have not taken any action to decarbonise now obviously all of the panellists today are very passionate and committed to decarbonisation but many aren't perhaps I wouldn't say passionate perhaps but certainly aren't as advanced as you are so can I just ask there are a number of questions here and we've talked briefly about barriers to it but resource the actual time taken to look at the support available to get the advice needed to take those projects through obviously will be fairly substantial in all the businesses than perhaps some of yourselves that could have a real impact on that kind of desire so I'm just wondering if I could ask I'll come to the three of you how much resource personal resource you have to put into that yourself and also in terms of how that information the information and support is presented to you is it available in an easy way is there that one-stop shop that provides both UK and Scottish Government support and advice would that be helpful and any other thoughts on that if I can come back to Joe again first then maybe to Paul and then to Murray okay so in terms of energy efficiency Scotland that resource is there and it's free to all SMEs I encourage anyone that I come into contact with on the website and have a look at it when it comes to the net zero targets it sits with me personally that's how important it is isn't somebody else within the organisation it's so important it has to sit with me and I think the leaders of any organisation of any size they're the ones that have to take responsibility and be the role model within their own business coming back to your first point about us being enthusiastic and it's something that I talk about a lot so what I do is I try and inject that energy and enthusiasm through the beauty industry through my associations that are within my industry and the beauty industry is not known for sustainability but if they can see people like me that's a small independent growing business that places the leadership at the forefront of decarbonisation in net zero then hopefully I can encourage other people to do the same thank you and Paul a consultant came through the resource efficient Scotland programme and they just went through all our bills and just looked around the whole building so it was basically they did the report and they handed it to us and we got costings for some of the things that they suggested sometimes it's finding some of the the things that they have suggested it's actually finding what is the best de-stratasfire what are the best parts or machinery to work in this way or that way and that's where you could probably give additional support so once the report is done for you from resource efficient Scotland maybe a list of preferred suppliers or suppliers that are accredited by zero waste Scotland we can get to the next stage of implementing the ideas that you've given thank you Paul and to Murray there's a wide range of service riders like the other panel I would advise everyone to engage them all your question about time all SMEs management of time it's the nature of the job isn't it we've struggled always to get things done but I see decarbonisation and all the elements around this so businesses who do not take the time for it may in the future struggle it's a key part of that business excellence, on-going, operational stuff we are now talking about sustainability car reduction we have the same gravitas that we talk about health and safety in our industry and to be honest I'm coming from the energy sector this is oil and gas companies who have changed their direct way of working, their engagement our clients we are all heavily on board so health and safety is all this to all businesses in a high risk environment like offshore oil and gas it is critical and sad to say that we've learned the lessons of the past some pretty serious disasters obviously in the North Sea and around the world so if we get the same importance to the climate emergency which we genuinely feel we are seeing from ourselves and others I think it will bring real weight and gravitas to the subject but get that across at all levels but all the other bodies that the families have mentioned through the way Scotland and all those things I would just advocate to be engagement that you must allocate time within your business but A individual senior management someone to take it serious and as serious as you take your health and safety requirements I would suggest I suppose it's really encouraging to hear such enthusiastic people about this perhaps we should have had some complete cynics on as well full idea of some of the barriers but thanks very much for your time thank you, Emichael Thomson I think in that case it falls to me to just engender a little cynicism into the discussion I think we could probably all agree that true sustainability is underpinned by a kind of golden ethical thread if you like and I suspect all of you as exemplars this morning on this panel will privately be aware of some companies that you've seen who are frankly taking advantage of the consumer demand for the changes we will want to see so-called greenwashing if you like I'd appreciate some examples at your SME level where you've seen obviously don't name any businesses but examples where you've seen that you would consider to be greenwashing and perhaps can I ask Joe first and then Michael and I suspect Murray to have an important view as well Greenwashing is every day in our business and the CMI has only just come out with some guidance on greenwashing particularly within consumer products and the beauty industry and generally when you look at the beauty industry as a whole what any consumer industry is doing is trying to sell more products and they will try and do that by any means possible and that goes across the industry and across the size of businesses in terms of putting it into context out of the beauty industry within the UK which is a billion pound industry you have only got 12 B Corp certified businesses and I just use that as one example of a third party verification mark so that means that the rest of the industry basically can see whatever they want to say to encourage customers to buy more stuff and if that means that they go down the sustainable angle the green, organic, natural all of these words don't have recognition in terms of definitions unless they have a third party verification mark so again this does come back to Murray's point as well it's about different standards within industries that have certification marks that we should use to our advantage to support making sure there's no green motion there'll always be some green motion but to minimise that and Michael totally agree with Joe it's a fantastic marketing tool for organisations to plan a tree the more you buy this product the more trees are there there are lots of issues around shipping companies who are offsetting all their carbon but how much investment are they doing in terms of eliminating carbon you look at the airline industry as well it's exact same how we protect ourselves as we try and go above and beyond I so there are things that we're open about the areas that we want to improve we do use polyurethane we do use plastics they're not evil they have a role to play so I would say in terms of green washing it does exist it's a marketing tool people are becoming more aware they're conscious of sustainability and suppliers are providing a service and they're leveraging this a lot of the carbon offset programmes I would just build on where offsetting the carbon I wanted to offset it in Scotland I wanted to plant trees, have woodlands work with the local community and do that and it would have cost us about five times the amount it cost us £14,000 to offset our carbon emissions that would have been to do it in Scotland that would have been £70,000 you know so I think we need to tighten up about the carbon emissions at carbon offsetting in terms of the organisations that are green washing we should shame them we should bring it out and make people more aware it's more than just planting a tree there's a lot more that we have to do we need to eliminate carbon that's a critical thing net zero is important, not carbon neutral Mary, do you want to come in? I think it's a very difficult question for me to speak to so if you're asking me to risk our business I suggest that it's complicated we are potentially working in a sector that's against the grain we're extracting hydrocarbon from the North Sea and other areas around the world but I think you have to move forward it's a transition isn't it we can't turn it off the model there's around 35,000 people in Aberdeen directed a lie on this industry I personally am very proud to have been working in the oil and gas sector I'm very proud of my father but our time is coming we are making a big movement when you see the large in the national oil companies buying into renewables and wind farms off the North East of Scotland which will be our future and hopefully many of the highly skilled high wage economy that we're encouraged to get in the UK will come from us I suppose that the energy guys for one of a better word for making it difficult for me to answer this so we all need to move to energy transition green is important and things like hydrogen, carbon capture will come from the North East of Scotland will be based around the oil and gas sector we have 2,400 metres of subsea pipelines which will be great hydrogen storage for us it's very much the emphasis on the tea and the transition and the energy sector still feeds clothes, moves and saves the world so it's a very difficult thing for me to ask In some respects I appreciate I was being unfair in asking that but you've correctly identified that the transition in terms of legislatures understanding interim moves that actually could be claimed as greenwashing so a classic example is kind of zero waste to landfill when 50 per cent may be incinerated and ultimately end up in landfill so you've correctly highlighted some of the transitional points also that businesses may go through themselves in scoping out the various things so I suppose my final question then is in what further ways would you highlight today legislators can understand the transitional steps from your perspective and the complexity that you've highlighted and again John, do you want to come in here cos I know you didn't have a chance in the last one and then we'll just round up with that Thank you Yes I can just go back to one point that Jamie made about cynics cynics do us all a great favour in asking the so-of-work question it's generally relatively easy to have a conversation with cynics cos you can get down to facts and information and detailed discussion and usually you may progress there and typathy and complacency are the biggest issues here and the massable priority the people that are just somebody too struggling they're too poor, they're just too distracted they're migrants we have a global issue here so I think that's a much greater issue than people being cynical about this in terms of regulatory support I think a key point for me is the public sector is very capable very clever civil servants Dearway Scotland's got a lot of really good people I worked in SEPA, I've got a massive regard for SEPA but they need to engage earlier I think with industry we see a lot of design work on policies and legislation well down to the line before they engage with us and I think we need to improve the quality of regulation and policy by earlier engagement co-creative policy development cross-sectoral policy development and that will I think originate more coherent delivery mechanisms because everybody will be on board earlier and I'm a great believer on best available techniques so when something changes in a sector we should all be doing that we shouldn't be allowing the old age practices that are more polluting to continue so adopting best available techniques more readily and earlier engagement with the sectors being regulated as to what's needed for this transition we've got to find different ways of working that are more co-creative and more cross-sectoral all up thank you and Joe and Michael if you want to come in on that as well so I think what John has said he's done it eloquently enough I don't really have anything to add there I think the more the industries engage early on within policy changes and looking at the best available technology but also looking at the best available that's out there in a global and that's why for us it's been third party verification marks to cradle to cradle design that's about designing products and services with the circular economy in mind elevating these ways of doing things you don't necessarily have to pay for that there is a lot of that information that's accessible but what happens is it's not necessarily guided through policy and just on that it strikes me that and I'm talking about all Governments across the piece here may choose to engage with larger more established businesses because that's often where their channels are where a lot of the change in the sector is coming from businesses such as yourself high very very rapid growth more fleet of foot so does that cause a disconnect in general terms? I don't think it does because if you find businesses that work themselves and probably everybody that's on here on the panel we are the bridge between innovation and large businesses so we are directing Unilever on how they can use reusable packaging so we are using the best of both worlds in terms of nimblness of foots we are less risky because it's less expensive for us to make mistakes as a smaller business than a big conglomerate like Unilever but I don't think there's the bridging of a large business and a small business to support Government policies or other agency policies I don't think that happens as often as it could and that means you're bringing the best of both worlds together but you're also then changing impact so we're a small business our impact on sustainability is small but if we can influence larger businesses like a Unilever for example then the impact will be much bigger Okay, thank you and Michael, last word from yourself and Paul, I'm aware as well that you haven't had chance to comment on this thread so Michael and then to finish up with Paul thank you If I could ask the panellist to be brief in the responses that would be helpful thank you I agree with everything that's been said what I would also say is that sometimes you just need to have a clean break and say transition to hydrogen from natural gas and force that to bring about the change and that makes it more immediate and it focuses the mind and then put the infrastructure in place to support that transition Thank you and Paul Yeah I don't consider my business as in any way certainly being so dependent still on oil for its heating so I think in terms of legislatures if they think about a framework like Michael just talked about about getting us there and there's a big take and a lot of people have mentioned this on the panellist in the long run it has saved us money and it's made our customers more comfortable in our building Thank you Thank you, I'd like to thank all panellists this morning for a very interesting discussion, thank you for spending time with the committee we'll now have a short suspension while we change over the witnesses Welcome back to the committee session we are now joined by our second panel who will speak from the investment perspective I want to thank the panel for joining us and welcome Simon Crichton who's head of relationship management at Treados Bank UK David Ovens from joint managing director of Arcangels and Fraser Sein regional director for SMEs led corporate from the Bank of Scotland Thank you for joining us this morning We are holding the session as we are weeks away from the start of COP26 The panel is interested in hearing from the panel about what expectations they might have COP26 and also responding to the session that we had this morning with SMEs I just noticed that they have identified some issues with SMEs around misaligned or weak incentives and inadequate information in supporting businesses moving to net zero I was wondering if we could start in that area and talk about the support available and if Simon would like to open up on that response Good morning, thank you very much A short introduction to Treados Bank in that we've been 40 years in the financial and environmental space with sustainability and it's really in our DNA We took part in Bankers for Net Zero as part of our change finance agenda helping and supporting other organisations and it was great to hear some of the SMEs talking this morning about how they support their peers and their competitors in many ways in changing for the better Bankers for Net Zero work it was clear that some of the research that was undertaken and looked at Covid is pretty dominant in SMEs minds in terms of going into survival mode but actually when digging deeper into Net Zero it was clear that maybe the incentive programmes just weren't quite right and quite often we're talking about this shift and I think Joe mentioned it this shift from the pioneers being able to engage and really take this on to actually becoming the mainstream and we're going to make this leap pretty quickly and dramatically to the main economy becoming actually all pioneers in Net Zero So, in terms of the Carrington stick approach there isn't one single still ability in our view and it really is bringing together of all the solutions at the same time and joining them together so for Government effectively when they come out with policies they think about how that interacts with their procurement policy so they actually linkage so that actually you can support SMEs in and thinking about your procurement in lines with that Net Zero strategy Thank you Sorry, I didn't mean to interrupt to continue with that That's fine, I was just going to say in terms of banking itself thinking about the cost of capital so when investing in new technologies and seeking support SMEs and organisations with new technologies that are in this change agenda and really pioneering maybe a lower cost of capital could be attributed to support that journey and that doesn't have to be necessarily in deep policy we saw that with the lower capital requirements of the Covid structured support that supported thanks to support SMEs and the like and maybe that system could actually be used in terms of supporting the transition we need to make in the same similar short order we need to get on with this and maybe that's something that could come out of COP in terms of some real action that can support SMEs Thank you David, could you maybe respond to some of the issues raised by the panel this morning and talk a bit about the organisation addressing some of the funding gaps and support for SMEs Yes, absolutely I should probably start by describing the universe of companies that we support so we are an early stage investor so we're supporting high growth companies in the tech and life science sector we're really at the start of their journey so really within the first 10 years of their journey and as such they are consumers of cash, if you can put it that way rather than generators of cash so whilst pretty much all of the businesses we support would recognise the sort of challenges and the ambition to get to net zero I think most of them are frank that focus on their core business so trying to grow sales trying to manage costs and cash and they've got limited resources I think as well there's a knowledge gap which was touched on this morning in the panel this morning I think many small businesses would lack the knowledge and expertise to be able to implement effective carbon reduction strategies and for example most would not know where to start in terms of how do you measure your baseline position and how do you monitor progress going forward so I think the challenges are financial particularly in terms of our university companies but it's also knowledge and these are the things I would like to see progress on in the next period Thank you and if I just close with a question for Fraser Fraser if you can maybe reflect on the evidence this morning and also had a look at the Bank of Scotland website the case studies of organisations companies that have been funded there was quite a mix and there was a lot of businesses who were taking loans in order to finance a transition to net zero can I ask if there's any incentives or a different way in which those loans are treated at all from loans that other businesses are requesting Yes okay thank you morning everyone so I think from a product perspective the one thing that we do do to try and help our clients and incentivise if you like for the green initiatives that they are funding as an organisation we have the clean growth finance initiative which is a £5 billion fund which was upsized from £3 billion earlier on this year and that has two aspects to try and help clients one is that for term loans there are discounted arrangement fees and in many cases no arrangement fees for the funding to support that particular initiative or if it's asset finance or kit that might be required to try and help on the transition and as a discounted margin compared to the published rates so from a financial support perspective the clean growth finance initiative that we have is probably the key thing can you say is that typical of the banking sector to take that kind of approach to encourage green investment I couldn't comment what the other banks are doing but I think collectively this is a challenge that we need to solve together. I don't think one organisation in their own is really going to play a transformational role. Yesterday we hosted an event so in the run up to COP26 we hosted an event with K Adams the broadcaster so we had 300 of our SME clients in Scotland register for the event and actually some really interesting parallels to the discussion from earlier on this morning SMEs don't have dedicated teams to try and help them on this journey unlike some of the larger companies that we see in Scotland and across the wider part of the UK so they are actually asking for help from the banking community the professional community, the Government the Zero Waste Scotland I think everyone needs to try and work collaboratively here to try and make a difference against the common enemy which is carbon emissions so I suspect all of the other banks have initiatives to try and help but I can only really comment on the one that we are really proud of here I'll now hand over to Fiona Hyslop to be followed by Colin Beattie Good morning everyone there is global self-interest and the market situation will drive the net zero adoption by many companies but we also need other kind of carrots and sticks in relation to UK financial regulations do you think that net zero should be incorporated into the UK's financial regulations and if so what form could that take and also any views you have on other financial incentives that might help and assist and maybe if I could maybe come to Simon first then David and then I can come to Fraser Thank you very much I say all of the above and so I do think that we'll need to use all measures to be honest Treados was a founding partner in PCAF so that's the partnership for carbon accounting financials so that's looking at carbon emissions not only our own emissions but actually it's the emissions of our if you like our borrowers and our customers that we lend to and the impacts there because that's obviously the majority of the bank's carbon emissions is the activity in lending and so we founded that along with 12 other partners in 2018 and that is really step forward globally now and has been accepted as a way of measuring we talked about standardised approaches to measuring so that's important for banks but it's also important for SMEs so we've gone that route and so that's really important to us and we believe and we are pushing for the regulators to really include this and be part of the driver towards investment from banks in terms of where it goes towards debt zero because it's really important but also clearly the carrots as well for both banks in terms of those capital reliefs and other investment in the sector but also clearly for SMEs and really joining that up so it's not one approach it's got to be I'm so sorry to repeat but it's got to be you've got to join it up and bring them all together and I did hear actually in this morning's session about somebody talking about and I can't remember who it was saying about almost on a sector by sector approach because you don't want necessarily to disadvantage and you could argue that's a good approach to take in terms of really then following through all the actions that are required and if I again sort of bring it back to the area of the market in which I operate which is the earlier stage market I do agree that industry standards and accreditation is an approach that we should be trying to adopt but again I'd go back to the help and incentivisation to allow companies to achieve that particularly where your early stage companies and cash constrained we have historically had a lot of support from Scottish Enterprise on the funding side and on the company support side and what we've seen from Scottish Enterprise in the direction of travel they've published a net zero framework recently in the summer and I know that that's a document that they continue to update and Scottish Enterprise is asking companies who they support to commit towards working towards net zero and actually more than that they're providing some of the support required to get there so they've got sustainability experts they do very good webinars they provide advice but beyond that they also provide funding which is really quite important examples on a green jobs call which they had recently and I know another call that's just going to be opened on that front so that's certainly the direction of travel in terms of the local position in terms of the national position you touched on the tax system I think there are things that can be done through the tax system certainly in terms of our area the R&D tax credit area has been a really important mechanism of getting cash back into the hands of early stage companies and I just wonder whether there's something that we've done at the UK level roundabout greeting that type of structure so yes I think industry standards financial regulation need to evolve to take into account these global ambitions that we've got but companies do need help and support and knowledge to be able to implement those thank you Fraser yeah probably a build on my last answer so if I reflect back on the conversation that we had yesterday with 300 SME clients we posed the question which was what is stopping your business from transitioning to net zero faster there were probably three themes that came out one was a lack of knowledge one was other priorities whether that's recovering from Covid or the supply chain issues and the other one was cost prohibitive so I alluded to what we are trying to do as an organisation a few minutes ago with our fund so we are trying to help from that cost perspective but if the industry the government and collaboratively we move towards other incentives to try and accelerate the transition to net zero through tax incentives for example I think that would be hugely welcomed by the SME community and then could I just follow us up by asking about the international competitiveness of our systems to do this clearly businesses are trading through this period we have heard about doing it by a sector by sector basis could actually then take everybody at the same time but clearly we are also in competition internationally so Fraser I wonder if you could perhaps comment on where you see the international competitiveness of funding of SMEs as do you think Scotland and the UK is competitive in this area with the direction that it is going in net zero and then to Simon and David I'm interested in the strength of Scotland's asset management potential for green investment and where again is the competitive edge that we could have and do you think we'll get enough from COP26 in that global financial regulations to allow us to make the most of the opportunities here and the speed at which we can do it first of all Fraser could you think about it from a competitiveness of SMEs internationally yeah so I think can I touch on the UK green growth index first of all which is work that we commissioned in conjunction with Oxford economics so that looked at the Scottish landscape we published that report just in September actually and I think it's a really positive outcome for Scottish businesses in general and actually Scotland when you look at it not necessarily internationally but across the UK Scotland were in pole position to capitalise in the opportunities that the green economic revolution has and that was justified in probably two different ways one is the 21,000 green jobs and mainly highly skilled jobs that already exist within Scotland that compares extremely favourably to any other part of the UK on a per capita basis and then the second thing that I think will help on the transition is the education footprint that we have is geared towards green jobs in the future as well so I think from a skills perspective we are well placed already I think the opportunity for Scotland is also arguably greater from the research that we've done than other parts of the UK so I think that in itself we will hopefully provide part of the infrastructure to help our SMEs transition faster Thanks Fraser Simon, can we come to you on that wider international perspective I don't think we can ignore the natural capital base that Scotland has to start with in terms of that advantage that immediately Scotland has and also I agree in terms of the pioneers in Scotland that existed within Scotland already almost as a breeding centre and effectively feeding off each other and that sort of is almost like being the silicon value effect in terms of green innovation in terms of coming together and working together and we've seen both new so EMBA buses, electric buses so a new entrance into Scotland and really they're the first model but conversely if you think about green tourism as a certification scheme that was born out of Scotland from actually government so visit Scotland and so it's born out of if you like government almost into a thriving business that actually is arguably and from what I see and colleagues see is a leading brand working on a net zero so they're constantly developing as well really forging ahead and that sort of feeding off each other I think is really strong and has great high potential for Scotland I'm thinking more about the financial situation and the financial opportunities and what banks can do what asset managers can do and how do you think Scotland's place within that and are we going to go back Simon and then I'll come to do it so I suppose for what I see a trade-off model in terms of we're a relatively simple bank in terms of loans and overdrafts supported by retail customers we think that actually in our position in Scotland we see very strong support actually on the retail side so there's clearly a demand from customers to supporting businesses and we don't actually have an issue or challenge in terms of bringing that finance of that type of finance in lending finance into Scotland it may be different in terms of bringing different types of capital but actually many of those challenges are actually a challenge of the net zero transition I mentioned natural capital earlier actually it's quite challenging to bring funds in to bring funds into natural capital but the models just haven't quite matured yet in terms of bringing money in and how to develop in terms of actually carbon capture in nature which Scotland is absolutely set up to deliver but those models aren't quite mature yet so it's actually just the pioneers at the minute finding ways and trying to research ways of doing that and once again quite often they're based in Scotland and that's within the forestry sector in terms of enhanced carbon capture Thanks very much Simon and finally to David on that scene So in terms of what would I like from COP it's obviously a commitment to support businesses financially and through knowledge if you like to achieve these ambitious targets if you then bring it back to Scotland and what advantages we have I think on the panel this morning somebody talked about tech as an enabler to get to net zero so if you think about Zoom or some of these online platforms if you wanted to meet somebody in the US 5, 10 years ago you had to jump on a plane and head out there now you can do it over Zoom and Edinburgh in particular many of our companies are now harnessing data to make much more informed and better decisions which will help us to achieve those targets So in terms of the ecosystem that we've got in Scotland and it's built around the universities the knowledge base we've got a very strong ecosystem and then if you apply that to the funding models I think one of the great things we have in Scotland historically from an early stage funding perspective that Scottish Enterprise have been able to develop with private sector investors and that's a model that co-investment model has been replicated across the world so we shouldn't underestimate the strengths of the ecosystem we've got just now and if you look at what Scottish Enterprise did over the last 18 months in terms of the Covid response they had the systems, the structure structures and the knowledge to be able to get cash into the hands very, very quickly So going forward and applying that to the challenges that we have in terms of transitioning to net zero Scottish Enterprise I think it's going to be a key part of all of that in terms of the innovative funding structures that grants to get those into the hands of the early stage companies and to impart that knowledge as well how do I measure my carbon footprint just now forward That's going to be an important role for Scottish Enterprise Thanks very much I'll bring Michelle Thomson for a supplementary Can I draw the panel to the record that I'm an ambassador of the all-party parliamentary group for fair business banking that took part in the bankers for net zero work that's been mentioned earlier Some say there's a paradox between the endless drive for profit and reaching net zero Perhaps arguably there's nowhere that's more evident than in our financial system I wanted to ask the bankers first of all in terms of their own reaching of net zero First of all, does your pension scheme for example has it set a target for when it will reach net zero and do you measure against that Fraser, I can see you nodding and I'll ask yourself as well Simon Yeah, so Lloyd's Banking Group made seven commitments when we issued the financial results in February that included the investments that we make through our pension scheme and the aspiration for them to transition towards net zero as well so our group ambition would be net zero by 2030 and we are as everyone else is on a journey so there are a number of things that we have done already on that transition so relatively simple things but actually they can translate across to all of the things that our SME client should be thinking about as well and that knowledge share between what we do and our clients do is really important so whether it's LED in the buildings whether it's electric vehicle charging points in our car parts whether it's renewable energy source for our electricity and gas for example, they are the kind of things that we are transitioning for with the hope and aspiration to be net zero by 2030 as a group Are you reporting that against that on an annual basis or an interim basis every three years or is it just set for an ambition? I honestly don't know whether we are going to report on that annually or not but given sustainability is such an important part of our organisation and clients in the wider economy I suspect it will not be three years before we report on that I think we will give a more frequent update but I can check for you That would be useful, thank you Reporting for us is a key to this and so we report all of our emissions within our financial accounts each year and that now includes since launching the PCAF system for measuring emissions of the customers that we lend to we also report the emissions in that supply chain as well in terms of our own emissions renewable energy is what you would expect from Treados as a pioneer our UK office is really outstanding our Dutch office is really groundbreaking in that it was established in 2020 and it's wholly deconstructible so it's built in the circular economy in mind so that you can take it apart and then reuse those materials which we consider where we've got to get to in the construction industry so if you like backing what we believe if you like as a bank in terms of pensions we actually use so we don't manage our own fund as such for the co-workers so that our co-workers' pensions don't actually set up initially on the most sustainable offering made it's up to the individual co-workers to decide which fund they ultimately go with I could talk to the bank does manage funds as well so in the Netherlands we have what we call a pioneer fund which really is the outstanding sustainable businesses and supporting customers to find investment space so that they can invest in that pioneer fund to support those companies on their journey as well as a fund that if you like is the best of the best or the rest should I say in terms of investments so that actually for people who want to find maybe not the ultimate pioneers but actually find the next step in organisations and the full part of our lives if you like who are the best operators and I want to direct my investment that way and so the bank supports its customers doing that Just following on from that I've got a couple more questions so for both of the banks first of all before I bring David in how specifically have you changed whether it's your balance business score card or whatever to put net zero at the top rather than just profit so Fraser and Simon before I bring David in another general question Fraser first I think I would go back to the point I made a second ago which is the seven commitments that we made in our annual report on accounts which I think if you look back years we would not have had that amount of detail in terms of what are we trying to achieve as an organisation through the investments that we make the commitment that we have to our own organisations transition to net zero that would have not looked anything like as detailed or as ambitious as it is now and even in the half year results I think it was in the financial times where we were recognised as having made a huge amount of progress in the European Climate Leaders article so I think we need to run these things in parallel as an organisation I think sustainability if I think about the messaging the early messaging from our new group chief executive and how high sustainability is on the agenda for the group and our new group chief executive is going to permeate through everything that we do going forward and if I bring that back even to the college journey at the minute our colleagues are in the process of being trained and accredited through a sustainability programme with the Cambridge Institute of Sustainable Leadership 900 of our commercial banking colleagues have already gone through that programme that translates into 75 per cent of my team up here in Scotland and if you think about my team which are the RMS and the RDS that do the face-to-face client engagement with our SMEs I think that's a really powerful commitment and more than that by the end of this year there's an obligation and a commitment to make sure that 100 per cent of my team are fully trained so the ambitious from the group permeating all the way down to what we're doing at a colleague level because that can help the clients to navigate themselves through what is a really complex area and they might have information out there on sustainability and trying to see the good for the trees is part of the role that I think our RMS and RDS have and then sharing best practice the ideas that they have seen or heard of both that we're doing internally as a group and trying to share that intelligence with our client base to try and at least drive marginal gains is really important so I don't think we can underestimate how seriously the group are taking this In that respect I was surprised to see that Bank of Scotland or Lloyd's group hadn't participated in bankers for net zero given that it will be presented at COP26 what was the thinking about that I noticed that it handles banking to your DOS we're in that please one of the very large banks what was the rationale for you not participating in that I think there are different alliances that we are fully engaged in so we've got the Glasgow financial alliance for net zero and we're also an active member of the Scottish business climate collaboration forum as well all of these initiatives are to try and help collaborate an idea generation as we all transition to net zero so as I said we're members of other alliances not necessarily that one Simon I've got one more question so I can bring you in quickly so going back to the first question I asked about how specifically you've changed your measures in the bank to ensure that net zero is on or near the top alongside profit given the paradox I described earlier absolutely I mean you've got to remember that Trios was established 40 years ago to be all about people, planets and profits so putting the three together but that doesn't mean that we haven't evolved and radically changed over those 40 years from where we started out and you know I think PCAF measuring the emissions of our lending book that's a really serious part of any banks understanding it and then understanding how we can support customers on the journey so actually part of the relationship manager training in terms of saying because all of our customers have a relationship manager and therefore clearly if we're going to transition SMEs because the majority of our customers are SMEs we've got to support relationship managers to help them better signpost because as it was highlighted there's a plethora of information out there you get snowballed by the management of information out there as an SME relationship managers to understand what our good source is and what we can point to as well as also highlighting those pioneers those great organisations who are doing things brilliantly these pioneers are willing to share that they are profit motivated and profit is an important part so that's sustainability but actually they realise that this climate issue is for all of us so they are really willing to share on that part I'd like to bring in David here for my last question because I'm aware of time for everyone else to get in it's about risk appetite generally do you perceive that businesses in this space are treated differently from a risk perspective given that they're often new innovative often smaller what's your perception around risk appetite across the whole kind of finance spectrum David applying that to net zero specifically I mean there's a weight of capital in the early stage investment markets just now and there's a lot of capital just now and historically that's been targeted very generally so within asset class you've had really forward-thinking organisations and one here is social investment Scotland and their equity solicitors which is really focused on identifying entrepreneurs who have impact at the core of what they do so they absolutely want to make a profit but they want to make a social or an environmental impact and this is very much focused on how do we embed that within the operations of the company going forward that within the context of asset class has historically been the exception rather than the rule what we're seeing now though is definitely a shift and there's much more of a focus on net zero on ESG more broadly and actually funnily enough I heard the panel this morning we were saying code was awful and we've got to hold a lot of things I actually think for the broader universe of early stage companies back 18 months ago they had to really step back and look at how their businesses were operating and look at all aspects of their businesses and it was a survival thing but they were forced to stop travelling they were forced to embrace technology platforms such as Zoom and MS teams and all the rest of it they had global supply chain issues they were forced to look at can we get more local supply so they were forced into a lot of business decisions which actually now when you step back not only were there the necessary decisions at the time but actually in terms of transition to net zero actually they make a lot of sense so what we're seeing now in terms of the focus of the broader asset class is much more of a focus on what is your net zero plan and we're more inclined to back people who have a positive strategy in place to do that and we try our best to help companies to achieve that too so if you look at the BBCA which is obviously the industry body for venture capital they've been developing a sort of ESG framework questionnaire if you like which helps companies simple questions such as do you have an net zero policy where are your suppliers to build up a picture of where are we just now in terms of the carbon footprint and now that we've got this dashboard what can we do to try and improve that going forward so in terms of if anything to answer your original question I think the risk appetite in this space is growing rather than reducing I'll now move over to Colin Beattie to be followed by Alex Burnett we are a bit pushed for time this morning if I could ask questioners and panellists to be succinct that would be helpful thank you, convener as we've already said the SME sector comes in all sizes shapes and forms and accordingly no one finance option really covers everybody and we've seen the lack of diversity in how the SMEs are approaching their financing how do we ensure that that diversity in finance is made available for the transition net zero how do we communicate it to these companies what can the banking sector do to improve that I'll start with Fraser I'll probably end up echoing a few of the points I've arguably covered already there so from our perspective what we're trying to do to help is through the clean growth financing initiative but I don't think that in itself will solve the challenge right across the spectrum from the very smallest to the largest companies through the conversation mentioned things like Scottish Enterprise grants available or tax incentives I think to try and ensure that every SME has the wherewithal through intelligence and knowledge build as well as the financial support required to make the investments and the transition to net zero I think it has to be a collaborative approach across the banks, the government industry bodies because I don't think any of us can solve it on its own so as the part that we are trying to play is through discounted arrangement fees and discounted margins where appropriate to try and help to make the cost of that transition easier for an SME to take on board and just highlighting one of the points that came out in that wide-ranging conversation yesterday cost does seem to be one of the three key concerns that an SME client does have so it's a really interesting and unbelievably topical point to raise but I think from our perspective trying to support through margin and fee enhancements is a good start Fraser you mentioned that the Government could do something what specifically would you expect or hope that the Scottish or the UK Government might do to help so I think there's definitely a role in trying to bring all of the interested parties together this is a really complicated area to try and navigate as we've all mentioned before the amount of resources out there to upskill on sustainability is huge it's varied and it can be quite daunting for SMEs in particular so trying to help on the education piece supporting what we are trying to do what other professionals are trying to do what SFE are trying to do Zero Waste Scotland trying to help on the education piece I think would be a really really helpful step and probably the most important in the short term because I think a lot of the SMEs are still trying to get a handle on what the transition to net zero means for them so I think the priority should be on education and the support that the Government can do for those interested stakeholders together Simon, what's your view on this? Following up on the education piece I spoke about our relationship managers is a great place to start so it's making sure that as a bank we are also educated in this fast changing and fast paced world in net zero and our knowledge is definitely growing across all areas and sectors I would also say that it's clearly on a mission anyway but part of that is supporting other banks and organisations and Government so that bankers for net zero work we consider that part of our job if you like as TRIADOS bank what can we do so I think clearly that signposting as a bank, the relationship managers have got the direct contact with the SMEs that signposting is critical to quality information information came up again it's very fragmented in its approach it fixes one problem rather than the whole holistic approach for a business and I shouldn't have got to this stage already but what I'm clear asked for me is actually that standardised approach for measuring emissions within SMEs that both Government and banks can rely on and basically agree that it's the approach or an approach so that when incentivising that's an important point but how would you drive that who's going to drive that so if you like we're driving it from the bank's perspective so establishing PCAF and that's Science Based Targets initiative but Science Based Targets initiative is really for larger businesses and arguably is complicated for SMEs we really do need something simplified approach but on a similar if you like international and global scale I'd argue for small businesses so there may be things that foot already to deliver that but it's something that I think Government should also get behind and the Scottish Government could obviously get behind so you feel that would be the responsibility of Government to establish a standardised measurement or approach I think that they've got to be part of it in terms of accepting it clearly for if we believe that some of this will need grant support and wider patient capital support as well as direct bank lending support to make these transitions I think it's going to have to be well accepted and so I think Government is critical to that acceptance as well OK David, do you have any comments on this? Yeah, I do so obviously the funding has to be appropriate to the stage that the company is at and for the company's weed support that's early stage equity funding but it's also grant funding and there are a lot of different sources of grant funding through Zero Waste Scotland SE and the UK and others the awareness of what those sources are I think it's really important in terms of the knowledge piece but also the funding side I think needs to be as joined up as possible as well so clearly Scottish National Investment Bank has a really important part to play in the financing side but as does Scottish Enterprise and it's just making sure that the market is clear about that interaction between the funding that we can get from Scottish Enterprise and how that interacts potentially with Scottish National Investment Bank so I think there's a bit of work to be done there I think in terms of your question about who can drive these sort of standards and I think Scottish Enterprise does have a really important role to play there and it's starting to happen in terms of the requirements and support in terms of the net zero framework just now so I think that that being much more important going forward particularly for our own estate company I'll need to make progress now Thank you Thank you convener and my register interests as a house builder building on Michelle Thompson's points on risk appetite green mortgages were first offered over a decade ago I think linked to the code for sustainable homes they then disappeared before making a tentative reappearance now a homeowner spending less on energy is a better credit risk that should be reflected in their mortgage terms so I can ask why is it not being reflected fully in the mortgage market now and when you have your conversations in your credit teams what are the stumbling blocks that appear and at the risk of being a leading question is it the credibility of the EPC system and secondly just the conscious of time second point would a solution be improving the loan-to-value regulation imposed by government on banks for energy efficient homes or even accredited businesses be a solution to Simon First and then Fraser Thank you so in the UK we don't offer residential domestic mortgages we do in the Netherlands and they have an interest rate scaled to their EPC equivalent so there is actually a pricing differential based on that EPC and also the transition I believe that so actually people looking to improve their homes I believe they've got some transitional interest rate differential so the bank has taken that approach in the Netherlands we haven't got there in the UK yet in terms of business assets clearly we think this is where regulation I think has its part to play in terms of capital waiting and loan-to-values because yes ultimately for a bank today to invest in a building it's as much about use as well not only the EPC rating but to invest in a building that's maybe substandard that maybe is meant to be for office use you have got definitely that climate risk coming your way and that collateral valuation risk in terms of EPCs themselves they are a baseline I think the UK green building council proposed alternative methods to improve the ratings of buildings and I think I would defer to them in terms of the quality of EPCs thank you Fraser I work and have broadly only ever worked in the commercial bank so I'm probably not best placed to comment on the specific mortgage thing but I think I can bridge across to how we're looking at that through the commercial bank which I think is of relevance so the green buildings tool which is a free tool that you can access through the bank of Scotland website does a couple of things first of all it helps to identify energy efficiency improvements that clients can make to the buildings and if you think about a client they either often own their building or they rent their building either way they're incentivised through everything that's going on at the minute to try and improve the efficiency of that building so that tool really helps to channel out on the efficiency or otherwise of the building and then what it also does is it looks at the investment required to try and improve the EPC rating so from a commercial bank it's effective for our SME clients to try and help them on that EPC transition that's a free tool that we've given access to our clients on and then secondly the other bit that's relevant from a commercial bank perspective is our ambition to build sustainable housing so we do that through a number of fronts through the lending to the house builders and we've also got housing growth partnership and all of these component parts of the commercial bank are looking at the building of houses through a sustainable lens there so I hope that helps but I'm not an expert on the mortgage market. I appreciate that and David do you have anything to add? It's not in our space so I've nothing really to add to what Simon and Fraser have said. Okay thank you. Thanks very much and can I thank the panel for their contributions to us today I've got two questions the first is we've heard from each of you in different ways about positive incentives and positive approaches to fund people who are doing the right thing who have positive action in mind do you think there's any likelihood in the future where you or others may increase the cost of funding companies who are in high carbon sectors or high carbon regions is there the negative instrument in that and my second question is a separate question around how we make sure we don't see the continued value of death or missing middle of Scottish start-ups that fail to find commercialisation or scaling due to lack of access of funding so my first question about increasing costs to fund grey companies can I ask I think for probably all three if you can be brief and then the second question to the two banking folks thanks. Sorry carry on. Thank you very much yes so you have to be clear so trade us already has lending criteria on building quality so actually you could argue that actually in terms of our capital that we deploy in terms of lending we're restricting anyway to those that are on the highest levels of EPC and sustainability in what they're building is new and so that's already built into our If I can just cut in there talking about lending to all SMEs not just those involved in house building, thanks. Yeah, so if we're taking collateral as security or looking to if we're looking at an SME building well maybe it's a new care home or something like that for example we look at what they're building and actually that's part of our lending criteria in terms of actually making sure that it's up to the quality that we'd expect given the net zero ambitions and conversely for those organisations that are operational already have a building we have got a product I guess it was the discussion about on residential I didn't focus on it from a commercial perspective where we might price a facility initially at one price but have a step actually if they can demonstrate that they've made the changes in transition that we are helping them finance so our support has a step in the facility agreement and so we've provided that across normally on a sector approach but certainly in tourism we've done it previously and in cost of funding based on performance and transition thanks Simon could I go to Fraser next I think it's really important that the access to finances available to all SMEs so what we're trying to do at the minute through the clean growth finance initiative is to help to incentivise that transition into a green future so it's available to all clients that want to make a green investment and if you go back to some of the other points we've talked about it's really important that everybody transitions throughout the supply chain so from the largest companies all the way down to the smaller companies and through the discussion again yesterday for the larger companies to make their own transition to net zero in all of the component parts they need all aspects of their supply chain to transition as well so I think it's really important that and I think it's where your question was going that the access to the financial incentives are available to all because it's really important if we are going to collectively achieve the ambitious targets then we need to make sure everyone is on the journey with us so it's a combination of targeted support where we can and going back to this education piece to make sure people understand what support is available for them through idea generation and initiatives that we've seen elsewhere so I would argue that we are trying to make sure it's available to everybody Thanks Fraser and David Yeah and I'll be brief because I'm conscious of times so in terms of the instrument we invest it's early stage equity and therefore the pricing things less relevant the relevance really is in terms of our investment strategy and our investment policy technology and life sciences companies and as such they tend to be enablers of a transition to low carbon we tend to look less favourably from an investment policy perspective on companies which are in oil and gas for example Thank you David and could I just go back to Simon and Fraser and ask about how we ensure we get beyond start up and deal with the value of death issue that we have in medium sort of post start up companies Fraser first Sorry, would you mind repeating that I couldn't quite hear the question Of course, no problem I think we see what ACDI has called the value of death or the missing middle where Scottish start ups fail to find commercialisation or scaling due to lack of support lack of access I suppose to capital Is there a way that you can see that changing? So I think from our group's perspective on that and I could be wrong on a number but I think we have committed to try and help support 75,000 start ups so whilst most of I guess the equity funding comes from people like David Evans and there is a role to play in the banking community as well so I think we have a commitment to help and it's a material commitment to try and help start ups as well but I guess my core focus is on more of the established SMEs and the support measures that have outlanded so far Thank you Fraser and to Simon same question Yes, I guess our focus would also be on that core SME sector we don't specialise in start up finance but if we do see something that we think is pioneering and we get to understand it and take time to understand it and believe it looks like it's replicable so it's not just a one time only project that actually it's done and dusted and all the risk is in that one project and there's no further gain effectively if we see actually hold on a minute there's something here that got something that actually is worth replicating and potentially replicable across many regions then we are willing and have a pot, a high impact pot of funds to take additional risk and actually is specific to that but it really is for those pioneers as we see it so we're willing to where the benefit we see it really is there Thank you Simon, thanks all Thank you, we are pressed for time but I will invite Colin Smith for a brief question to be followed by Jamie Halcro Johnston Thank you very much Fiona touched on this issue earlier on how we stand in Scotland when it comes to access to finance but can I briefly ask the panel whether they believe there's any other countries Scotland could learn from Simon, you mentioned the pioneer fund in the Netherlands but are there any other examples that we should be learning from in Scotland and maybe start with yourself Simon There are always examples and that's one of the things that Treados does in the SME world in terms of if we find something we publish all of our customers that borrow money from us and part of that is actually that organisations can learn from each other and spot chances to improve from, crikey, there are always things Denmark on their food policy how they transition their food strategy in Denmark I think is amazing and they are effectively getting towards being world leaders in sustainable food I think there are lots of things to learn from there, I know many groups and I believe there have already been people like Nourish have been out, I believe to see what they're up to in Denmark and some of the groups that understand what they do so Scotland is already learning crikey there are lots of examples more than I can even think of at the minute but yes definitely there's always chance to learn and Treados believes that in its own action to learn ourselves and develop and evolve I'm sure you can send us many more examples if we ask them to thank for that and I don't know if David and Fraser have got anything they want to suggest If I just jump in briefly and I'll touch on Maggie's question so I won't pat ourselves on the back too much but I think a lot of countries have learned from the Scottish model and in terms of the early stage what we do well is a public private partnership in the past and that's a model that's been replicated across other countries and it's been a valuable model to allow companies to grow to Maggie's point just in the scaling obviously the journey of a growing company can take many many years and it's only realised as the companies get more mature that debt becomes the appropriate instrument in the early days it tends to be equity that's the appropriate instrument there were issues around about access to that sort of scaling capital and I won't bore you with the details but there were alignment issues with early stage investors and later stage VCs what I would say is that that's getting much much better there is in terms of the equity markets there's a much broader weight of capital globally just now so the real issue for Scottish companies just now is how do we communicate what great activity is going on just now because there are some very very good early stage companies scaling companies in the tech and lifestyle sector in Scotland just now which deserve to be able to scale and they just need to get themselves out there and communicate what they've got very beautifully Scottish National Investment Bank is important in this journey as well and I'll go back to an earlier point we just need to be clear about the interaction of Scottish National Investment Bank which should be capable of dealing with that scaling issue and the role of Scottish Enterprise which is very much dealing with the earlier stage of the company's journeys Thanks, David Fraser, anything you want to add around who we could learn from? I'll say two very quick points I'll refer back to the green growth index I alluded to earlier we're actually Scotland because though we're in pole position in the sustainability journey relative to the rest of the UK and then we have dedicated teams within the commercial bank and the wider group whose sole purpose it is to help on the group's journey towards net zero for ourselves as an organisation and to help educate the commercial bank and the retail bank so we scan the intelligence all over the place we've got the Cambridge Institute sustainable leadership through our training programme and again that just picks up the best of the initiatives out there that we work country to woman on right now they're probably the ways that we try to look at trying to improve the proposition Okay, thank you. Thank you very much Good afternoon to the panel I'm in Highlands and Islands MSP and obviously a lot of the businesses that I represent are in rural areas so I just wanted to ask you your thoughts on the impact of rurality in supporting net zero and also what can be done more I suppose and whether you feel that your organisation support are able to deliver that support in rural areas Sorry, if we can go to Fraser first Yeah, everything that we do is available to all of our clients whether it's the CGFI fund whether it's the RNs on the ground who are located, I've got RNs the Niles and up in Orkney all of them trained all of them dedicated to trying to help clients on the journey and yesterday in the K-Adams event it was very complimentary the work for both banks, professionals HIE together to try and help transition all clients no matter where they are on the road to net zero Fraser, can I just ask you of the nature of Bank of Scotland there have been branch closures by a number of banks in rural areas and across the Highlands and Islands do you think that's impacted at all on the ability to deliver that particularly on the face-to-face one-to-one way So we haven't checked so if I look at the commercial bank we haven't changed the face-to-face model so we've got a combination of as I say, RNs in every corner of Scotland supporting the SME clients and then those that are SME clients that fall below the model that I look after are supported by our business bank and that's a telephone banking service anyway so the access to speak to an RM in my world or an RM on the telephone in the business banking world remains unchanged Okay, thanks Fraser Can I just put the question in terms of supporting rural businesses to David and then to Simon So briefly from my perspective I mean I think the key aspects are the digital infrastructure access to finance and people and you know a company based in Moray should be equally as capable of being a global responsible business as a company based in Edinburgh so I think that this broadband infrastructure is important, I think the role of the enterprise agencies are really really important in this regard in terms of the access to finance but also in terms of the knowledge from the investor community of what's going on in these rural communities and I think that's probably all I've got to say on that Okay, thank you Simon Yes, great, thank you so Trinosive model isn't a branch network and so probably ironically more densely populated in our customer base in the rural sectors because we haven't got generally had that competitor of a high street branch effectively so our model is set up to serving everybody equally one thing you would say within that is that we've clearly all learnt in the Covid years and that the relationship manager is not going to see customers as they used to individually and doing it by teams calls or Skype or whatever it is but actually broadband is an essential feature and I know certainly in other countries we've financed broadband infrastructure in rural communities in the UK actually our corporate finance team supported raising capital for a broadband installation and rural network and I think I also live in the countryside and I think it's critical to be honest because clearly this is going to stay with us and is really important part of our lives now to thank the three panel members this morning to Simon and to David and to Fraser and thank you for staying with the committee for an extended session your contribution is much appreciated I will now close the public part of the meeting and move into private session