The Scottish National Investment Bank (SNIB) will not be able to end its reliance on public funding unless ministers can make a case for UK Treasury rules to change.

This is according to a new report released by Audit Scotland, which lauds the bank’s progress in the four years since it was launched, despite the banks current reliance on said public funding.

The bank was launched in 2020 to independently invest in commercial projects that will help address the climate crisis, boost innovation, and improve the wellbeing of communities.

According to the report, it has made good progress since then.

The report found that by the end of 2024/25, SNIB had committed over £785 million into 43 businesses and projects, attracted £1.4 billion of private sector funding and helped create or safeguard more than 3,000 jobs

The bank has been well run to date, with the report stating that it has a rigorous process for investing public funds and has laid good foundations for reporting on its impact.

It generated over £19 million in income in 2023/24, more than covering its operational costs for the first time. However, current financial rules are a barrier to the bank’s ambition of ending its reliance on public funding.

Scottish budget arrangements stop it carrying unspent public funding into the next financial year. While UK Treasury rules mean the bank cannot retain financial returns and recycle them into future investments.

Without the ability to do this, the bank will need ongoing annual capital allocations from the Scottish Government to remain operational.

Stephen Boyle, auditor general for Scotland, said: “The Scottish National Investment Bank was set up to deliver economic, social, and environmental benefits for Scotland, as well as a financial return – and it’s made a good start on those ambitions.

“But for the bank to be successful, the Scottish Government needs to address the lack of flexibility around the bank’s budget, and the barriers presented by UK Treasury rules.”

The report’s findings and recommendations are based on evidence gathered through reviewing documents, analysing data, and through conducting interviews with representatives from the Bank, the Scottish Government, other Scottish enterprise agencies, financial services and renewable energy sectors, public finance economists, and an equalities and human rights specialist.

Commenting on the report, deputy first minister Kate Forbes said: “Audit Scotland’s report underlines the positive impact the Scottish National Investment Bank has had on the investment landscape.

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“The Bank has committed £785 million in investments since its inception and attracted £1.4 billion in private sector funding. This is helping build businesses, create jobs and reduce carbon emissions.

“The Auditor General also notes the sound arrangements made by the Bank and the Scottish Government on its governance, accountability and risk management.

“The report sets out clearly the complex financial and budgeting operating environment. The Scottish Government is taking action to improve the financial position for the Bank, but this report is clear that the UK Government also needs to take action as part of the Spending Review process to ensure that the Bank can reach its full potential.”