The ongoing conflict in Ukraine is rightly dominating public discourse across the world.
Almost three weeks after the invasion began, tens of thousands of Ukrainians are without food, water or power as a tragic humanitarian crisis deepens and it is hard not to feel helpless at the harrowing images displaying the sheer desperation of citizens seeking to protect their land and loved ones.
Sadly, hopes for a relatively swift and peaceful resolution to the situation are receding and the economic sanctions that have been rightly imposed on Russia are likely to be measures that endure for the foreseeable future.
It is encouraging to see a wide range of financial and professional services companies taking the necessary steps to reduce and eliminate their exposure to Russia as part of this process.
These sanctions have brought a number of urgent policy considerations to the fore for Western democracies, not least how we continue to ensure security of supply for our energy system, particularly given Russian gas supplies Europe for over 40% of its needs.
Net zero important for Scotland
Of course, all of this takes place in the context of a pressing climate emergency and the ongoing need to support the accelerated transition of our energy mix toward a net zero future.
In many ways the UK, particularly Scotland, can and must play an important role in meeting this challenge.
Scotland is in the in the favourable position of being able to rely upon existing natural assets in oil and gas that, through domestic production, will help the UK reduce its reliance on more costly and carbon heavier imports from overseas.
Crucially, the skills, experience and infrastructure of this world class-industry will play a pivotal role accelerating the development of green energies, particularly offshore wind.
To take just one example, earlier this year Crown Estate Scotland approved developments that will generate 24.8GW of offshore wind power as part of the ScotWind leasing round in which some of the world’s largest and most successful energy companies were successful.
Placing this in context the Moray East windfarm, currently operational, represents just under 1GW which has the potential when at full capacity to power 950,000 homes and account for 40% of Scotland’s electric demand.
The scale of the opportunity before us is huge and the challenge now is to ensure Scotland becomes a globally recognised green energy hub.
The key test will be in practical delivery – targeted investment is needed to increase the capacity of the supply chain, onshore energy storage and grid connectivity supporting high value manufacturing, operations and maintenance and innovation required to deliver these developments at pace.
Financial industry to play its part
This is where Scotland’s financial services industry can and must play its part.
Last November, the Chancellor announced in the margins of COP26, that he was implementing measures for the UK to be the world’s first net zero aligned financial centre.
This is a hugely positive development and one that aligns closely with our ambition to establish Scotland as a centre of excellence for green finance.
Scotland has pivotal role
I have therefore written to the Chancellor ahead of his budget statement later this month and urged him to formally recognise Scotland’s pivotal role in realising this ambition and to invite him to address the ‘Financing Energy Transition’ summit that Scottish Financial Enterprise is hosting later this year in Edinburgh.
The clear aim of this summit is to bring together leading representatives of both the energy and financial services sectors, to harness their collective experience and identify the challenges to be overcome and opportunities to be pursued if we are to meet net zero targets.
Through collaboration with the energy sector, we can act as a bridge between the wider industry and Scotland’s natural resources to finance carbon-offsetting opportunities.
We can align long-term capital pools with green projects to facilitate innovative investment opportunities, and we can lead the way for transparent disclosure on climate risk and aligning the data requirements and standards across the industry.
Secure energy security for UK
Innovation and collaboration are at the heart of this approach and the financial services sector is enthusiastic to work with the energy sector on areas where we have shared aims.
Financial services and energy are the two largest sectors in Scotland by GVA, employing an estimated 375,000 people between them.
The potential benefits of a long-term strategic partnership drawing on the strength of both industries are huge.
The last two weeks has witnessed a series of tragic and worrying developments contributing to an emerging geopolitical context that is hugely uncertain.
But there is one uncertainty that will endure and that is the need to address the climate emergency.
Scotland has the tools at its disposal to make a significant contribution in this regard and become a global hub for green investment whilst sustaining employment and securing greater energy security for the UK.
This is an ambition both government and industry must rally behind.