Interview: From delivering food parcels to delivering investment - the new CEO of Scottish National Investment Bank

On the face of it, Al Denholm’s CV appears to tell the familiar story of a private school-educated middle aged investment executive.

Having joined the Royal Bank of Scotland in Edinburgh straight out of university in 1986 as a trainee investment analyst, he has enjoyed a successful career spanning senior asset management positions around the globe, with roles including head of equities for Scottish Widows and Insight Investment, and chief executive officer of Prudential Portfolio Management Group.

He has devoted the entirety of his working life to ensuring his private clients get bang for their buck. But now, 11 months shy of his 60th birthday, Mr Denholm is pursuing a significant new direction. On Thursday, he was announced as the new CEO of the Scottish National Investment Bank, an institution set up by Scottish ministers to expedite the nation’s journey to net zero and, it is hoped, help instigate a transformational shift in Scotland’s economy.

Since leaving his last position at Aviva Investors in September 2021(the thought of retirement, he says, never crossed his mind) Mr Denholm has occupied himself in ways which reveal something of his character, and which may hint that the bank may have shifted direction itself by appointing someone, well, a little different.

As well as pursuing powerboating and scuba diving qualifications, and embarking on gruelling cycling challenges from San Diego to Florida, and Land’s End to John O’Groats – the latter trip raising funds in memory of his late friend, Martin Gillott, an officer in the Queen's Gurkha Engineers – he has helped deliver food parcels, volunteering as a driver for the Felix Project, a London-based charity which redistributes food from supermarkets, wholesalers and restaurants to frontline charities and primary schools.

Hold on a moment. Food parcels? Charities? This hardly fits Mark Twain’s characterisation of a banker as someone who’ll lend you an umbrella when the sun is shining, only to ask for it back the minute it starts to rain. Mr Denholm laughs when confronted with the stereotype.

“It’s so inspiring,” he says of his time volunteering. “When you turn up as a school, as I’ve done, with crates of food, and you see parents queueing up to collect it, you know you’re making a valuable difference. It’s an amazing charity. I’ve told them I’ll have to step down as a driver for a while now, but I’ll be back at some point in the future, because I think their need is going to be here for a long, long time.”

Mr Denholm, who officially begins his work at the bank tomorrow, certainly has plenty to get on with. Since its inaugural CEO, Eilidh Mactaggart, stepped down for personal reasons in January last year, the publicly funded investment bank has gone through a long and often strained process to find her successor. Sarah Roughead, the chief financial officer, took over the top job on an interim basis last March, with the global executive search agency, Spencer Stuart, appointed at considerable expense – £175,000 for a six month contract – to find a new CEO.

Scotland's First Minister Nicola Sturgeon (C) flanked by former Scottish National Investment Bank CEO Eilidh Mactaggart (R) and chair Willie Watt signs a visitors book at the bank's official launch at their headquarters on November 19, 2020 in Edinburgh, Scotland. (Photo by Andy Buchanan - WPA Pool/Getty Images)

At one point, a candidate was lined up to take over, only for them to ultimately decide, in the words of then deputy first minister John Swinney, “not to take the post.” That disruption at the top of the bank’s executive leadership team arrived at an inauspicious moment, given it was, and still is, in the process of scaling up.

Amid political pressure to replace Ms Mactaggart, the bank has also faced bruising external scrutiny. The Federation of Small Businesses has said questions about its remit have gone unanswered, while Ross Brown, professor of entrepreneurship at the University of St Andrews, characterised the bank as “unfocused and ill-conceived”.

Now that Mr Denholm is about to get his feet under the desk, he is happy at the progress that has been made so far, hailing its “market-leading” capabilities and investments. “I’m full of admiration for what’s been done,” he says. But does he believe that void at the top stemmed the bank’s growth, and does the fact it took 15 months to appoint a new CEO demonstrate the need for a shake-up of its processes, particularly around how it attracts executive talent?

“I don’t think it does, actually,” he replies. “It’s very clear that we had an interim CEO in Sarah Roughead, who I think has done an amazing job keeping the momentum going – I don’t think there’s been any slip in momentum at all. She’s been ensuring all the processes are being developed properly, and the governance, which is very strong, is in place, and we’ve seen the momentum of the investments so far.

Al Denholm, newly appointed Chief Executive of Scottish National Investment Bank

“If I was to think about this from the perspective of the chairman making the appointment, it’s been very clear that he wanted to make the right appointment, rather than an appointment just to tick a box. The fact that it has taken 15 months is just what it’s taken.”

Mr Denholm, who will receive a salary of £240,000, takes the helm of a state-owned investment vehicle that has been set three overarching goals by ministers: to invest towards achieving a just transition to net zero by 2045; to invest in places and regeneration to “reduce inequalities and improve opportunities and outcomes” for people and communities; and to provide financial backing for innovation and “industries of the future”.

All are grand ambitions, and much work will have to be done to measure their delivery – the bank, for example, has yet to disclose the ‘scope 3’ emissions of its investments and its supply chain – but Mr Denholm said he finds the missions ”incredibly inspiring”, adding: “The very first measure of success will be clearly what the Scottish ministers have set as objectives in the 2020 act. That’s clearly to invest in certain key missions. What we need to do is to show that we’re being successful in delivering those missions.”

And what about ensuring the bank walks the walk, as well as talks the talk? For a public limited company set up to address the “long term, persistent challenges” facing Scotland, and which counts “extending equality of opportunity” among its strategic goals, some facts are as awkward as they are jarring. The bank has no ethnic diversity at an executive director or non-executive director level, and the median gender pay gap stands at 28 per cent in favour of men.

“I think those statistics are what they are, and I think they reflect the past,” Mr Denholm tells me. “In the future, we have to make sure we address all of those. In my own personal history as a leader, and something I’m very proud of, when I ran the investment business at Prudential, the day I left we had 50 per cent men and 50 per cent women on the team, and 35 per cent BAME. I think that shows the way my mind works, and we’ll move in that direction in due course.”

It is clear that the bank has significantly stepped up since its launch in November 2020. It has made a total of 27 investments worth £415.1 million, with a further £680m in capital brought in from other lenders and investors. Even so, some wonder whether it is doing enough to maximise its existing resources.

The bank deployed just £129.3m in investment last year, less than two thirds of its £200m budget set by the government, and the most recent annual report shows a net loss of £8.6m. These may be early days in the bank’s journey, but at a time when questions around the stewardship of Scotland’s public finances have assumed an added urgency, do numbers such as those measure up?

For his part, Mr Denholm stresses that the annual report only captured a “snapshot in time”, and he expressed a desire to “crowd in” private sector money, a move that will ultimately require the approval of the Financial Conduct Authority. “We’ve got a massive pipeline of opportunities,” he explains. “When you start off as a business, you need to get up to speed, it’s like getting a big flywheel turning, and I think we’re probably now at the rate and the scale to deliver at a higher rate than we could have on day one. I think we’re in good shape to deliver on that going forward.”

He admits that the current economic climate poses a challenge, not just for businesses, but the public at large, but believes that the bank’s investments will “take on even more resonance” as a result, pointing to the £15m it has put into Social and Sustainable Capital’s housing fund as an example.

The good news is there will be more money - a lot more money - to come. Arguably one of the most significant announcements during the SNP leadership contest, albeit one which flew largely under the radar, was First Minister Humza Yousaf’s promise to increase the funding of the bank fivefold, up from from £2bn over the next decade to £10bn.

Mr Denholm has yet to meet with Mr Yousaf or finance secretary, Shona Robison, and the Scottish Government has yet to offer details of how and when the major uplift in capitalisation will be deployed. Regardless of the finer details, the money being pledged is highly significant. Is there scope for the bank to pursue even more ambitious missions and goals as a result?

“Clearly, that’s up to the shareholder at the end of the day in terms of what they want to do around the funding and the goals,” he says. “We’ll make sure we’re set up to deliver on whatever the Scottish ministers ask us to deliver on.”

Asked if the extra capitalisation as pledged by Mr Yousaf would allow the bank to broaden its portfolio, or simply invest more in companies it is supporting, Mr Denholm added: “First of all, it’s a hypothetical question, we’ll have to wait and see. Once we know what the ask is, we’ll be able to sit down and come up with a strategy that makes sense. It could be more into things we know. I’m absolutely certain it’ll widen the opportunity as well.”

Either way, he makes clear that any future investment plans will be made on the basis of meeting the mission targets set by ministers, with the long-term aim of becoming financially sustainable. “We need to find investments that make the impact and meet the financial objectives. We’re not just handing out money.”

As someone who has spent the entirety of his career in the private sector, Mr Denholm says he is prepared to be put under the spotlight by MSPs and the media. “That’s something I’m going into with my eyes wide open,” he admits. “I have no problems with that.”

And what about the main source of scrutiny – namely, the Scottish ministers, who are the bank’s sole shareholder? Mr Denholm says that he has “always had clients”. In the past, they have been major asset owners, looking for their investors to deliver the “best results” on their money. “I don’t believe that’ll be any different from what the Scottish ministers are looking for,” he concludes.

He is similarly relaxed when asked about the operational independence of the bank, and the prospect of political pressure being brought to bear (“I’ve been very comforted by the fact the bank has been allowed to operate as a separate entity, and I’m very comfortable that will continue going forward”). Asked if he has any concerns about a reputational impact on the bank as a result of the recent political upheaval in Scotland’s party of government, and the ongoing police investigation into its finances, he gives a calm, on-message response.

“Clearly, all we can do is continue to deliver what we’ve been asked to deliver, and if we continue to do that, if we continue to make impactful investments and make good commercial returns, I think we just get on with our job and deliver on our mandate,” he says.

Tomorrow, the hard work begins. Mr Denholm says he is not about the overhaul the bank. His ambition is to implement what has been promised, and do it well. “I think the mission that has been set is inspiring,” he tells me. “I don’t need to change it, I don’t see the need to change it. It’s very exciting, so let’s just deliver on it.”