What America’s Recent Bank Failures Tell Us About ESG Phasing

Photo Credit: Getty

Financial institutions that radically phase out fossil fuel and other politically scorned investments pose a serious risk to their own business, to investors and ultimately to America’s economy. This year alone, Silicon Valley Bank (SVB), Silvergate, Signature Bank and (more recently) First Republic all failed dramatically, and all were plagued by the same problematic strategy: an incorporation of environmental, social and governance (ESG) factors across their corporate governance. The zealousness of these banks to meet or supersede their stated ESG goals contributed to their inevitable collapse, since they pursued these goals at the expense of more important economic priorities.

How ESG Contributes to Bank Failure

Consider the epic failure of SVB earlier this year. It was the second-largest banking collapse in American history, its fall eclipsed only by that of Washington Mutual’s $307 billion in 2008, which occurred during one of the worst global financial calamities. Once the 14th-largest bank in the world, SVB managed $209 billion at its peak.

SVB’s executive team mismanaged the bank’s lending capacity, discounted fears of insolvency and refused to diversify its client base. But what made those problems much worse was the bank’s politically motivated overreliance on an ESG investing agenda.

Read the full article on Discourse Magazine.