The Ethical Investor: Pointing the finger at ‘woke’ policies distracts from real reason why SVB collapsed

The Ethical Investor is Stockhead’s weekly look at ESG moves and ASX news.

Right-wing America is blaming what they call “woke” policies for the biggest bank failure since the 2008 financial crisis.

While some republican candidates are calling it a “Biden payout” stating taxpayers would ultimately bear the brunt to cover costs, others are arguing the failure was a result of reckless spending which drove up inflation and forced the Federal Reserve to raise rates.

But the most vocal response to Silicon Valley’s (SVB) collapse was from those who believe the bank diverted from “focusing on their core missions” to programs such as corporate diversity and environmental, social and governance (ESG) investing.

The finger has been pointed directly at SVB’s UK branch chief risk officer, Jay Ersapah, who launched initiatives such as the firm’s month-long pride campaign and a new blog emphasising mental health awareness for LGBTQ+ youth.

A day after the New York City Post published a story on ‘top executives pushing woke programs’ the Wall Street Journal ran a piece noting the SVB’s board of directors included a black person, an LGBTQ person, and two military veterans, hinting the bank “may have been distracted by diversity demands.”

Blaming diversity shows a ‘gross lack of understanding’

Seven Advisory founder Mary Delahunty says blaming diversity, which has widely been shown to add to good decision making over time, shows a gross lack of understanding as to the complexities of the bond market at the moment.

“Or they are being deliberately duplicitous in their representations, and I hope for the nation’s sake that it is almost the second because what happened at Silicon Valley showed a mismatch of assets to liabilities, it’s as simple as it gets,” she says.

“It should have been the job of regulators to ensure that that sort of mismatch couldn’t occur.

“For regulators to instead blame personalities is grossly inadequate as a response.”

It also distracts from the fundamental problems, she says.

“Fundamental problems being holding long-range bonds in a rising interest rate environment and how to do deal with that situation, which has spooked depositors, and having a regulatory system that allowed for those conditions to be in place in the first place.

“For those in the regulatory environment, such as politicians, to almost shift blame to something that bears no relevance to actual issues at hand is so problematic.”

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