When supervisors did identify vulnerabilities, they did not take sufficient steps to ensure that Silicon Valley Bank fixed those problems quickly enough
Welcome back to the Climate Nexus finance newsletter – a regular update that looks at the big stories and players at the intersection of climate change, finance, regulation, and energy, with tips for the week ahead.
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SVB - Fed admits past problems, will it make them again?
The following passage stood out in the Federal Reserve’s recent review of regulatory and supervisory failings at Silicon Valley Bank:“Silicon Valley Bank’s board of directors and management failed to manage their risks. Supervisors did not fully appreciate the extent of the vulnerabilities as Silicon Valley Bank grew in size and complexity. When supervisors did identify vulnerabilities, they did not take sufficient steps to ensure that Silicon Valley Bank fixed those problems quickly enough.” This description could easily apply to most banks’ treatment of climate risks, which the Fed has recognized but isn’t rushing to act on. With some Fed insiders calling for a more assertive approach to supervision, will that change? In the same document, there’s a section where different Federal Reserve Banks highlight future risks; climate change is a long way down the list.
Banking AGMs see notable climate support
Shareholder proposals focusing on climate policies have gained significant support in recent votes at major banks, including WellsFargo, Bank of America, Goldman Sachs, and Citigroup. But, proposals pushing for phasing out financing of new fossil fuel projects received less support than last year, with fewer than 10% of shareholders supporting the resolutions at banks. To date, investors appear to favor moderate demands for disclosure and transition plans over stronger climate action, but fail to support the action scientists say is necessary to prevent dangerous climate change. JP Morgan and Morgan Stanley will be the next banks to face shareholder climate demands at their meetings in May.
Private equity is coming for your puppers (and fossil fuels)
A new report by the Private Equity Climate Risks consortium sheds light on the energy portfolio of the Carlyle Group, revealing for the first time its true climate impact. The findings are astounding, adding to the growing evidence that PE firms are invading every aspect of the US economy, such as housing and vets. Did you know that Carlyle is one of the largest owners of gas-fired power plants, rivaling giants like Berkshire Hathaway Energy, NRG Energy, and the Tennessee Valley Authority?
Carlyle claims they’ve been scooping up the polluting assets to push them towards decarbonization. “It would be nice if this claim were true, however past data does not give any indication that Carlyle is meaningfully pushing fossil fuel assets towards decarbonization,” says Alex Hurley, research analyst at the Global Energy Monitor. “Going forward, there is a clear onus on Carlyle to fully disclose the entire emissions footprint of these assets before and after acquisition in order to back up the validity of this decarbonization strategy. The value of this stated strategy is directly proportional to the absolute emissions reductions that it can achieve and verify in practice.”
Meanwhile, another major private equity firm, KKR, is facing pressure at this week’s Milken Institute Global Conference over their support for fossil fuels, including the coastal gas link pipeline.
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VC firms unite!
23 leading venture capital firms have formed the Venture Climate Alliance to guide start-ups and their investors towards net-zero emissions. The alliance aims to invest $62.3 billion in climate tech over the next five years, including renewable energy, energy storage, and EVs. The group will operate under the Glasgow Financial Alliance for Net Zero (GFANZ) to share best practices on climate solutions.