Editor's Note: This is updated from a story posted directly after the Silicon Valley Bank collapse last week.
Well-funded sustainability efforts by clean energy startups and established industry leaders have been going on for years and will continue toward carbon reduction goals at an unknown pace, but this week’s collapse of high-profile startup lender Silicon Valley Bank could put a pinch on some newer energy transition movements.
The bank that was shut down by regulators Friday had previously vowed to commit at least $5 billion in loans, investments and other financing to support sustainability efforts by 2027, the California-based bank pointed out in a 2022 statement.
“We will speak and act with integrity,” the SVB statement read. “We will be transparent about the types of transactions and solutions we will count toward this goal.”
A worthy standard, for sure, but eradicated in the wake of a run on Silicon Valley Bank’s liquidity put it into receivership managed by the U.S. Federal Deposit Insurance Corporation. SVB apparently got caught up in losing bond positions as the Federal Reserve continued raising benchmark lending rates to try and bring inflation down.
Meanwhile, skittish depositors kept withdrawing funds from SVB accounts, depleting the bank's cash on reserve.
Silicon Valley Bank was revered by many startup and energy entrepreneurs for its generous lending practices as compared to some other, more traditional banks. Energy transition media site GreenBiz compared SVB’s $5 billion sustainability pledge to the $150 million by JPMorgan Asset Management’s newer cleantech funds.
In fact, SVB's project finance webpage calculated some $3.2 billion in commitments to clean energy and sustainability projects to date. This funding hand touched some 62 percent of community solar projects, according to the bank.
Companies listed on that page as having some kind of funding relationship with Silicon Valley Bank included Sunrun, Soltage, Plus Power, AES, Leeward Renewable Energy and Bloom Energy, among many others.
The bank's positive impact on climate and low-carbon energy technologies was undeniable.
Ironically, Silicon Valley Bank’s “Future of Climate Tech” report from last year expressed optimism about venture capital and revenues in this sector following the extreme challenges of the COVID-19 Pandemic. U.S. venture capital investment in clean energy and climate technologies rose 80 percent from 2020 to the end of 2021, reacing about $56 billion in commitments.
At that point in time less than a year ago, Silicon Valley Bank had close to $191 billion in assets and nearly double that in deposits and investments. Unfortunately, it had kept a small margin of that in on-hand accounts and had deployed the rest in bonds and other investments which were losing their value because of a falling stock market and newer and higher interest rates offered by the U.S. Treasury and other lenders, according to reports.
Meanwhile, skittish customers started withdrawing funds and selling stock. And although the federal government promised to keep depositors whole, even beyond the FDIC maximum of $250,000 per account, some startups may not be able to get to other funds in SVB accounts anytime soon, running the risks of not meeting payrolls or loan payment deadlines and etc.
It remains to be seen what kind of drag this bank collapse in the heart of the tech sector will have on the newer energy transition players in the long term. It’s somewhat likely that some will survive and some will not, despending on their level of exposure to the failed institution.
In the short term, the fall of Silicon Valley Bank is a sudden and tremendous blow to the momentum of the sustainability investment movement.
