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“Why hate the investors?…” Commentary

20 March 2023

“…it’s not their fault.”  I wrote these words as the introduction to a blog several days before Silicon Valley Bank collapsed, and Credit Suisse needed £44.5 billion to avoid a similar fate.  I was criticising the banks in the Net-Zero Banking Alliance for breaking their agreement and maintaining their high levels of investment in Oil & Gas.  But here we see another kind of mismanagement, from Banks which, if anything, are entirely supportive of climate investment.

Unfortunately neither of these banks have been successful in managing their money.  What words are helpful in describing this form of failure?  “Bad luck” is not really adequate when it costs the tax payer (Swiss, not British) £44.5 billion.  Mind you, SVB’s bad luck was HSBC’s good luck.  It cost them no more than £1, the price they paid for SVB’s UK arm.

I have rather more sympathy for SVB because this liferaft, and indeed the liferaft supplied to the parent by US Government, preserves the financial stability of SVB’s customers.  Many of these are important tech development companies in the fight against climate change.

I have less sympathy for Credit Suisse.  In a world requiring trillions of pounds of investment per year if we are to reach net zero by 2050 – which is too late anyway – seeing £44.5 billion diverted overnight to stem the flow caused by their own mismanagement seems irresponsible in the extreme.

Am I being unfair?  Another, perhaps more important question, is whether this is the end of it, or are we seeing something of a banking crisis emerging through the economic gloom?

I do hope not.  Those of us who are working to fight climate change, to arrest and reverse global warming, require a stable and rational financial system to provide the investment capacity required to develop the new technologies necessary for a transition from a global economy dependent on hydro-carbons, to a global economy providing everything we need for life without using hydro-carbons.

A fragile financial system will undermine our work.  We can already see this with the collapse of SVB.  Let us hope profoundly there is no more to follow, and Credit Suisse is no more than a scare.  So let’s not hate them.  Let’s hope for the best for them.