Two members of the Scottish National Investment Bank’s board have been questioned by the Economy and Fair Work Committee on the recent resignation of its chief executive.
Eilidh Mactaggart resigned at the end of February, citing personal reasons, which led to speculation around the timing.
Chair Willie Watt explained that he was informed of her decision on 27 January, with shareholders, board and government made aware on 31 January.
"As an employer we respect her decision and request for privacy," he stated, adding that Mactaggart wants to spend more time with her young family and will consider future opportunities when she considers this appropriate.
As for the search for a new chief executive, he admitted that an appointment probably won't be made until the end of the second half of this year.
"It will take some time to recruit the right person, we will need to make sure we have a broad funnel to attract a wide range, then there will be a diligent process to make sure we get the right person."
This timescale did not "overly concern" Watt, as he is confident that current chief financial officer and acting chief executive Sarah Roughead will cope until then.
He also confirmed that the bank will use external search consultants "to broaden the trawl", identifying a set of firms which "have the right capabilities", with proposals sought on both cost and capability.
Board member Carolyn Jamieson - also chief trust officer at Trustpilot - said that the "bank has coped remarkably well, with a strong team left to pick up the reigns".
She also confirmed there was no severance package, and no non-disclosure agreement.
Responding to a question from Liz Smith MSP, Watt also confirmed that there were no disagreements about policy or the direction of the bank between the chief executive and the Scottish Government, that he was aware of.
As for the state-owned development bank's activities, Watt explained that since launch in November 2020, it has concluded 13 investments, totalling £191m of committed capital.
It is now currently considering 50 opportunities spread across its three missions and a wide geographic area.
The three missions: achieving a just transition to net zero by 2045; extending equality of opportunity through improving places by 2040; and harnessing innovation to enable people to flourish by 2040.
Moving from an initial skeleton team in 2020, the bank now has a headcount of 62.
At the beginning, Watt said there was significant pent up demand, with the bank being open to people coming to it with opportunities, as well as referrals from existing enterprise agencies.
"Going forward, we want to make outbound origination more prevalent, with more mission-fitted opportunities," noting decarbonisation of heat being an area which will require a lot of private sector capital, "so we will target companies engaged with that in year two of the bank".
Explaining the process, Watt said that his team always starts with the mission fit, before looking at whether there's a commercial investment opportunity - "we're not giving out grants, we expect to make a positive return for reinvestment".
The third element is state aid compliance, as "we don't wish to crowd out the private sector", he noted, adding that "our landing area is in the centre of those three overlapping rings".
Loan investments tend to be very long-term, patient capital, although there is some lending within project finance, which can be on a shorter term.
Echoing earlier comments about difficulties in the area from the Finance Secretary Kate Forbes, Watt stated: "We're passionate about scaling up of Scottish businesses, and we need more of this in Scotland - Skyscanner is a great example - but it's a long-term process.
"Scale-up companies make a much bigger impact on productivity," he continued, noting the bank's £30m investment to help complete Aberdeen Harbour in explaining that its loans are often bigger, while equity investments are smaller, but there are more of them.
"In the scale-up space, there's capital available at the early stage, while at late stages the private sector is capable of financing, but there's a bit in the middle where there's a role for the bank.
"The gap between Series A and Series B is where we can help achieve the milestones required to receive the capital from the private sector - providing either foundational finance, or keystone capital that 'makes the arch stand up'.
Watt stated that there are many projects that wouldn't have got off the ground without the bank's involvement, "so it's important that we highlight the kind of projects we think are investable", adding that it can "demonstrate a level of professionalism which will then attract in private investors".
Watt also admitted: "We won't be doing our job if every investment performs, as we need to be taking bigger risks than the private sector; so we will have losses.
"As we stand, I'm very comfortable with the positioning of the portfolio."
Performance is measured across a number of metrics - on missions the bank puts covenants in place, while on project finance it's often about how time-specific targets are being met.
Watt also mentioned the bank's subsidy control team, which operates separately from the investment team, looking at every opportunity to find out whether companies genuinely haven't been able to access private finance, before referencing those statements.
"We then apply the framework of State Aid approval, so there's an audit-able thread that runs through it all."
Responding to further questions from MSPs, Watt admitted his team could be better at explaining some of its investments - "we've been a bit naive in that sense" - so in the future he committed to making more of that public.
"We're still learning, there are unintended consequences of most types of activity, and that's certainly true of investment."
In terms of a specific enquiry around the bank's backing of the Gresham House Forest Growth & Sustainability Fund, Watt explained that the market failure was that the fund had a much higher percentage of native species and new planting than historically had been the case - the theory being that in a period when planting was becoming more prevalent, there would be demand for a fund based on sustainability.
"They could not find a cornerstone investor, so that was our role - as I said, the first capital is often the hardest," he stated, adding that public sector pension schemes are the next largest investors.
Finally, responding to queries about the bank's target rate of return, Watt said that ultimately that decision is for ministers, but his team would advise on what it thinks is right.
"Most of our investments will be unlisted, as that's where the most market failure is, but having said that there are benchmarks for innovation and infrastructure investments - so those should help to guide us in what the target rate of return might be.
The bank's new business plan should be published before the end of March, and will have a bigger emphasis on stakeholder engagement.
"We've got our house in order, so we should be going out more aggressively into the wider world," Watt concluded.
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