As revelations continue to emerge about the controversial corporate policies that Silicon Valley Bank (SVB) practiced in the wake of the bank’s collapse last Friday, Florida Governor Ron DeSantis (R) on Thursday announced a newly formed alliance between 18 states with the expressed goal of “push[ing] back against President Biden’s environmental, social, corporate governance (ESG) agenda.”
ESG is a highly controversial investment practice in which investment firms pressure companies to implement corporate policies having to do with issues favored by liberals, including environmental issues such as climate change, social issues having to do with “diversity, equity, and inclusion,” and structural issues involving corporate governance. Critics say the practice often undermines sound banking and economic principles to the detriment of financial stakeholders.
In recent days, financial analysts have noted that “SVB officers were heavily focused on so-called ESG policies while ignoring risk management responsibilities that could have detected trouble in time to save it from collapse and government intervention last week.”
Other eyebrow-raising details include the fact that only one member of SVB’s board spent their career in the financial industry, that the bank committed $5 billion last year toward “loans, investments, and other financing to support sustainability efforts” through 2027, and that the bank “donated or pledged to donate nearly $74 million to groups related to the Black Lives Matter movement.”
“There’s no question that there’s a connection between wokeness, the ESG investing movement, and what we’ve seen going on at Silicon Valley Bank and at Signature,” said Will Hild, executive director of Consumers’ Research, on Wednesday’s edition of “Washington Watch with Tony Perkins.” “Both of these banks were heavily, heavily involved in corporate wokeness in that culture. In fact, Silicon Valley Bank — as reported by the Daily Mail over the weekend — their chief risk officer had not performed a stress test on their portfolio for over nine months because she was busy planning Pride, LGBTQ and lesbian recognition events, basically.”
Hild went on to observe that when banks prioritize activities other than banking, there will likely be negative consequences for the public.
“Time and time again, we see companies, when they focus on ESG, when they focus on wokeness, they take their eye off of the ball of focusing on consumers,” he explained. “In this case, it was focusing on making sure that they didn’t lose their customers’ money. But we’ve seen this in other contexts as well, where the quality of products and services goes down because corporations are too focused on other things.”
When banks stray too far from their primary mission, Hild warned, there will likely be litigation coming down the pike.
“I think you’re going to increasingly see shareholder lawsuits that are aimed at [liability],” he noted. “… You can’t just do anything you want with corporate assets, with the brand, with the goodwill of a company and say that it’s in line with the fiduciary duty that you have to shareholders.”
Meanwhile, state officials like Governor DeSantis are also taking action to curb the influence of ESG investing. According to the governor’s office, he has received the commitment of 18 states to initiate “state-level efforts to protect individuals from the ESG movement,” which could include removing state pension funds and investments from companies that adhere to the ESG model. The states include Alabama, Alaska, Arkansas, Georgia, Idaho, Iowa, Mississippi, Missouri, Montana, Nebraska, New Hampshire, North Dakota, Oklahoma, South Dakota, Tennessee, Vermont, West Virginia, and Wyoming.
For the moment, it appears that the push from conservative states to divest from ESG is making some major investment firms reconsider their strategy. After eight states removed $5 billion worth of pension plan funds from BlackRock, Vanguard, and State Street, BlackRock CEO Larry Fink did not mention “ESG” in his latest investor letter, which experts see as a sign that the company may be trying to find a way to dodge the issue.
“I do think you’re going to start to see a toning down of the corporate culture,” Hild predicted. “My concern, though, is much of the infrastructure that led to this may still be in place after it’s over. And the same people that have been pushing CRT and ESG … are still going to be in place. … And I think it’s incumbent upon us both as a nonprofit organization … to make sure that we systematically dismantle what led to this in the first place. [There needs to be] liability for the people who misused corporate assets [as well as] legislative changes to make it clear that the fiduciary duty has to be followed. What’s been amiss here is people have been taking assets that don’t belong to them. You have to make sure that people understand that there is a price to be paid when they break the law.”
Dan Hart is senior editor at The Washington Stand.
