JEFF LANDRY: What SVB Says About ESG
It has long been known within the world of innovation that the opinion of investors is often based on the opinions of other investors.
In fact, many flock to the same startups once momentum begins to build; and in some cases, that mad dash to a supposedly safe bet burns out like a flash in a pan. Interestingly, this same pattern of human behavior works in the reverse as well. As soon as it became clear that Silicon Valley Bank (SVB) had failed, the mad dash went in the opposite direction, with stakeholders desperate to retrieve their money in the first major bank failure in over a decade.
Of course, within Silicon Valley, it’s acceptable among startup investors to not understand the technology and place bets based on the leadership qualities and character of a founder; but it is still not acceptable, even there, for a bank to not understand risk management and bet on incompetent leaders. Perhaps this is why most startups fail while most banks do not. Yet SVB’s management behaved like a group of nervous founders straight out of college who only know how to talk equity and inclusion rather than liquidity and interest rates. And SVB is certainly not alone here.
While some may disagree with the view that businesses exist to solve problems, I think it’s clear that SVB was focused on solving the wrong ones, placing far too much emphasis on diversity between the sheets rather than in its portfolio.
However, mega-companies such as BlackRock, led by the formidable Larry Fink, are guilty of placing the very same emphasis on Environmental, Social, and Governance (ESG) ratings rather than focusing on shareholder returns — which is why I encouraged Louisiana’s Treasurer to divest from the investment management company and protect our state pensions. Still, many would have you believe that the failure of SVB has nothing to do with ESG, which is why I think it’s time we take a hard look at the objective reality before us.
BlackRock has been riding a wave of momentum built on the backs of inexperienced investors who believe ESG is not only a good bet but a safe one. And because Fink likely believes in his fantastic dogma of global transformation, his confidence has trickled down to eager investors who want to feel confident too. It’s taken such a hold over some that Fink was able to openly declare his preference for totalitarianism as a way to manage uncertainty in markets, while Joe Biden followed suit in perfect lockstep, pushing companies and banks to abandon common sense business practices in favor of woke ideology.
Meanwhile, Fink doesn’t have to prove that his vision for the future will succeed; he just needs to make investors feel safe and secure in his ability to make that happen. The failure of SVB and others is calling his bluff. And I believe that is why some in the liberal press have denounced their political opponents for pointing out the obvious: the emperor has no clothes!
To state otherwise, or continue to argue in favor of this utopian dream, is merely a ploy to keep the bulk of investors corralled within the ESG pen, lest they get the sudden urge to start another mad dash away from this supposedly beautiful future. Of course, in the woke mind, there’s nothing worse than being called a conservative, or gasp — a capitalist! Then again, they also believe business savvy and hard work for financial gain are taboo, arguing that all financial security should be handed down by the state.
So, why, I ask, are these people managing our money to begin with? And where’s the “safe space” from them?
Jeff Landry is the attorney general of Louisiana and a former U.S. representative.