The Biden administration’s Sunday decision to guarantee the deposits of all clients from failed banking giant Silicon Valley Bank (SVB) will make whole more than 1,500 climate-related firms, many of which are now poised to receive significant subsidies from President Joe Biden’s Inflation Reduction Act (IRA), according to The New York Times.
SVB — which collapsed Friday in a bank run — was heavily focused in venture capital and worked with more than 1,550 climate technology firms, many of which were preparing take advantage of the hundreds of billions in subsidies and tax credits offered by the IRA, according to the NYT. While the Federal Deposit Insurance Corporation (FDIC) would typically only make whole those clients with balances of up to $250,000, the FDIC instead opted to guarantee the funds of all of SVB’s clients, citing the “systemic risk” the failure presented, the government corporation announced Sunday, in the process making whole the many startups that were scrounging for cash over the weekend. (RELATED: Trading Temporarily Halted For Major Bank Stocks After Pre-Market Collapse)
“Silicon Valley Bank was in many ways a climate bank,” Kiran Bhatraju, CEO of Arcadia, the country’s largest community solar manager, told the NYT. “When you have the majority of the market banking through one institution, there’s going to be a lot of collateral damage.”
Thanks to actions we’ve taken over the past few days to protect depositors from Silicon Valley and Signature Banks, Americans can have confidence that our system is safe.
People’s deposits will be there when they need them – at no cost to the taxpayer.
— President Biden (@POTUS) March 13, 2023
If SVB’s climate clients failed or took significant losses as a result of its collapse, it could substantially reduce the impact of the IRA, Varun Sivaram, executive at renewable power firm Orsted and former adviser to U.S. Special Climate Envoy John Kerry, told the NYT.
“Climate tech companies may have problems making major investments in demonstration projects, pilot lines and research and development,” Sivaram told the NYT. “All of those investments are necessary to scale as quickly as possible and take advantage of the [IRA].”
The company had recently committed more than $5 billion in loans and other investments to support “sustainable finance and carbon neutral operations,” citing the “systemic risk” of climate change, according to a January press release.
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