There are claims circulating among some Republican politicians that environmental, social and governance-centered investing helped lead to the failure of Silicon Valley Bank.
ESG initiatives take into account environmental and social risks when screening potential investments. To help fact-check claims regarding ESG investing and SVB, Marketplace’s David Brancaccio was recently joined by Julian Mark, a business and technology reporter at The Washington Post. His recent article is entitled “GOP blames Silicon Valley Bank’s collapse on ‘ESG’ policies.”
The following is an edited transcript of their conversation.
David Brancaccio: So you’ve been fact-checking this claim separate from whether one likes or doesn’t like ESG investing. The claim that ESG played an important part of Silicon Valley Banks demise is the question — how do you answer that?
Julian Mark: I mean, I don’t think there’s any evidence that this type of investing or diversity initiatives contributed to the demise of Silicon Valley Bank, it was more of a perfect storm of complex financial matters.
Brancaccio: So what where’s this claim coming from? It’s a talking point for people who see ESG as carrying out a liberal agenda versus, I don’t know, a business agenda if one reads “business agenda” as necessarily conservative?
Mark: Yeah, I mean, ESG has become more or less a boogeyman among some conservatives who say that this investing, which includes environmental considerations, social considerations, and corporate governance considerations during investing is an interruption of free markets, sort of injecting liberal ideals into investing. So there has been a lot of sort of undercurrents, and Silicon Valley Banks fall kind of presented an opportunity to sort of create more or less a cautionary tale for what could happen to a bank that adopts these policies, of course, not supported by evidence.
Brancaccio: Now, I suppose we should point out that thinking about investments with environmental, social and governance issues in mind is not just for the Bernie Sanders wing of the Democratic Party. You have some stalwarts of Wall Street that have embraced this way of thinking because of the idea that in the longer run, considering ESG factors may end up paying off as an investment.
Mark: Correct. These are movers and shakers of the financial system, including BlackRock — they control trillions and assets. And ESG is really — at its core — it’s data, they’re measurements, and it can be used many different ways. And it depends on how you want to use them. But some of these companies purely use them to assess risks, you know, upcoming risks to businesses and even to capture value. So there are many who say that this is purely just good investing, just a good way of measuring risk.