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Scottish Stock Exchange: We’re Not Building this for Pornographers or Gaming Companies

Duncan MacRae


Tomas Carruthers, Project Heather founder, Scottish stock exchange

The Edinburgh-headquartered Scottish stock exchange will focus on businesses that can make a positive impact on the world.

Scotland is set to become home to the first stock exchange in the world to require joining companies to prove they are having a positive social impact on a global scale and in their local communities.

Project Heather, already two years in the making, is a project run by a group of like-minded financial professionals who hope to re-establish and renew the Scottish stock exchange in the second half of 2019.

There used to be five stock exchanges in Scotland. The first was established in Glasgow in 1844, with another set up in Edinburgh later that same year. One was founded in Aberdeen in 1845, another in Dundee in 1879 and Greenock even got one in 1888.

They were consolidated in 1962 after a study called the Jenkins report suggested the regional stock exchanges should be closed and consolidated. This led to the creation of the Scottish Stock Exchange in 1964. In 1971, an act of Parliament was then passed to create what was called the International stock exchange of Great Britain and Northern Ireland – the institution that is now known as the London Stock Exchange.

Established technology

There have been two attempts to create a Scottish stock exchange in the past 20 years, according to entrepreneur Tomas Carruthers, CEO and founder of Project Heather.

But each time they failed because they were being built on new technology, he says.

Project Heather, on the other hand, has partnered with Euronext, European Central Counterparty and Euroclear to ensure that the new stock exchange is built on the “best European market architecture”.

Carruthers, updating interested parties on the exchange’s progress today at Edinburgh’s Royal Botanic Garden, described the architecture as “world class”, adding he believed it would ensure his vision of a stock exchange that makes a positive difference to the world proves to be a success.

He explains: “In different ways, we were all affected by the financial crisis of 2008 and learned that a financial crisis can have devastating consequences for the real economy. Project Heather will build an exchange that can assist and support the real economy by improving access to capital and by providing liquidity to founders and entrepreneurs, and those who back them.

“The project is strongly informed by my vision of a capital market that serves society, that can be trusted to serve all stakeholders – a market which social entrepreneurs can use, charities can use, local authorities can use and find investors who are aligned with their mission.

“There has been a sea change since 2008 in the attention being paid by investors to what are called environmental, social and governance considerations, and it is no longer contentious to assert in 2019 the boards and management teams who score highly by these measures are recognised as creating more value for shareholders.

“We want to go even further and, in doing that successfully, the new Scottish stock exchange can and will become a global leader.”

Carruthers notes that his children are a major part of his inspiration behind a purposeful stock exchange.

“My middle daughter joined the climate strike last Friday,” he explains.

The 14-year-old has been massively inspired by Swedish schoolgirl Greta Thunberg who has become a prominent figure after she started the first school strike for climate outside the Swedish parliament building.

“My daughter thinks Greta is amazing,” says Carruthers. “Somehow that message from Greta – that climate change is a crisis and ‘why are all you men in suits not doing anything about?’ – has resonated with children and students around the world. A lack of initiatives to deal with the negative impact of climate change is catastrophic. The Secretary-General of the Commonwealth said last year that there are three Commonwealth states that will simply cease to exist if climate change can’t be halted and reversed.”

The Scottish stock exchange will require all of those who use it to analyse and report, at admission, on their securities and annually thereafter. Beyond basic impact reporting, standards that are already expected by the industry today, they will also need to communicate their purposeful and positive impact on the communities where they operate, as well as globally.

“We have the opportunity to establish together the first stock exchange in the world to require this,” says Carruthers. “It will, therefore, recognise justly the value of all the many other forms of capital in which we rejoice. Natural capital. Social capital.

“I don’t think that requiring companies to report social and environmental impact is going to make it harder to create a Scottish stock exchange,” notes Carruthers. “I think it’s going to make it easier because, in the 21st century, we should be measuring all of the values and all of the capitals, which are used by a business as it grows and not just financial capital.”

In doing this, Carruthers hopes the Scottish stock exchange will become the public market of choice for entrepreneurs who want to make an impact and the investors who want to back them.

“I don’t even believe in non-financial outcomes,” he adds. “I think all outcomes are financial in the end. Things like social and environmental performance. Does that mean that certain industrial sectors won’t be able to use the exchange? The answer is probably yes, but they are probably in the sectors you would expect not to be able to do that.

“It’s very unlikely that the vast negative effects of pornography could ever be outweighed by any other ancillary or purposeful measure, which that publisher or company undertook. Gambling is another one, with the vast negative consequences of gambling on society highly unlikely to be outweighed by anything the company does.

“So we’re not building a stock exchange for pornographers and gambling or gaming companies. Shock horror!

“We want companies that, of course, need to raise capital, so they need to be capital intensive industries. There are a lot of extremely good, very wealthy companies out there that don’t need to raise capital. The stock exchange is not for them.”

Baillie Gifford, an investment management firm headquartered in Edinburgh, appears to share the same outlook as Carruthers.

The company’s Positive Change Equity Fund seeks capital appreciation, with an emphasis on investing in businesses that deliver positive change by contributing to a more sustainable and inclusive world.

Speaking at the Project Heather update event, Lee Qian, investment manager at Baillie Gifford, says: “In terms of the type of companies we look for, when it comes to analysing their social and environmental impact, we look for a management team that is really committed to having a positive impact over the long-term.

“They are managing their business with the long-term interests of the wide stakeholder base in mind. Not just in terms of making profit but also in terms of treating their employees well, in terms of managing relationships with their suppliers, customers, the local community and the environment.

“So there must be that intent to have a really good business practice and good treatment of stakeholders. That is fundamental.

“Secondly, we look for businesses that have core products or services that are having a positive impact, whether they’re contributing to something to help tackle a particular social or environmental challenge. It doesn’t mean that the company will have a magic bullet. For climate change, it would be great if they had that, but that’s probably not realistic.

“But even a product that can make a small contribution towards a big challenge is a positive thing. So we’re looking for companies showing a long-term commitment, and with a product or service that is well aligned towards making the world a better place.”

Duncan MacRae


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