Silicon Valley Bank (SVB) has been praised for its Environmental, Social, and Governance (ESG) policies, but the bank’s failure raises questions about its priorities. The bank, which has focused on woke initiatives to increase diversity and invest in startups promoting a “healthier planet,” failed to spot its glaring problems with investments as interest rates rose.
SVB had an A rating for its ESG policies according to the MSCI index after creating its initiatives to “advance inclusion and opportunity in the innovation economy” and invest in clean energy solutions. It even announced that it would invest $5 billion by 2027 to support sustainability efforts.
SVB may have collapsed and their customers may not get their deposits back but they can least take solace in the fact that they were "committed to advancing Black, Latinx, and Women founders, investors, and leaders in innovation." pic.twitter.com/CXTjydeEQ4
— Greg Price (@greg_price11) March 13, 2023
SVB’s 2022 ESG report listed ethnic, racial, and sexual hiring quotas in pursuit of diversity, equity, and inclusion goals. However, the bank did not have a chief risk operator for eight months in 2022 and invested clients’ money in low-interest government bonds and securities. When the Federal Reserve increased interest rates, the value of SVB’s assets plummeted, and customers tried to withdraw their money. Many are criticizing the bank for focusing too much on woke policies and not enough on protecting depositors and shareholders.
The ESG report included SVB’s goal of sending every employee to “diversity, equity and inclusion education” by 2023. SVB also stated its intention of determining its procurement on the ethnic, racial, and sexual characteristics of its suppliers’ owners and staffers to ” increase total cumulative spend with diverse suppliers” to 8% of total purchasing by 2025. While describing itself as committed to “allyship,” SVB declared its support for “LGBTQ+ individuals” and highlighted its provision of “transgender reassignment surgery” through its employee benefits package.
SVB’s board included “1 black,” “1 LGBTQ+” member, and “2 veterans.” Among those members were individuals who sit on the governing board for NextGen Cyber Talent, a nonprofit that “provides a platform to increase diversity and inclusion in [the] cybersecurity sector,” and Venture Forward, which “focuses on advancing opportunities for women and underrepresented minorities in [the] venture ecosystem.”
SVB’s failure highlights the need for companies to balance their social responsibility goals with sound financial practices. While diversity and inclusion are crucial, they cannot come at the expense of a company’s financial stability. Companies should focus on improving diversity and inclusion while ensuring a strong risk management team and sound financial practices. SVB’s failure should be a cautionary tale for other companies prioritizing woke policies over sound financial practices.