The collapse of Silicon Valley Bank could have major implications for startups working to reduce planet-warming emissions, potentially undercutting President Joe Biden’s climate agenda. The Biden administration took steps over the weekend to avert the immediate failure of companies that relied on the California-based lender, including thousands of climate technology and low-carbon energy businesses. But it has yet to find a buyer willing to take on SVB’s domestic lending portfolio. That has left some major companies scrambling to secure new lines of credit, write POLITICO’s E&E News reporters Corbin Hiar and Avery Ellfeldt. “[It] is a major blow to early-stage and even late-stage tech startups looking to get financing,” Daniel Ives, a technology sector analyst at Wedbush Securities, told Corbin and Avery. The banking crisis, which is the largest U.S. failure since the financial collapse of 2008, comes at a critical moment for climate technology, just as the administration is beginning to roll out the $369 billion in clean energy incentives in the Inflation Reduction Act. Scaling up the country’s ability to produce low-carbon power and remove planet-warming pollution from the atmosphere is key to meeting national and international climate commitments. How SVB tanked: The bank, which has catered to the tech industry for decades, largely housed its assets in government bonds whose value started to plunge as the Federal Reserve raised interest rates. That set off a panic among depositors who moved to withdraw their money. The bank didn’t have enough cash on hand to pay depositors, so regulators shut down operations — in other words, an old-fashioned bank run. The administration’s weekend intervention, which created a backup fund to loan money to eligible banks, aims to prevent bank runs at other lenders by convincing depositors their dollars are in good hands. Green fallout: The collapse has hit regional banks particularly hard, which is bad news for environmental startups, especially ones that don’t have established business models. That’s because midsize banks are generally more amenable to working with niche sectors or smaller markets. Community solar projects, in which a group of homeowners goes in together on a large off-site installation, have boomed thanks to the support of midsize banks. SVB was a major player in the space, participating in more than 60 percent of community solar financing deals. Climate tech companies are now waiting to see if the financial industry treats the collapse as an isolated incident or a larger problem that merits tightening lending standards for startups. “If the reaction in the industry is instead that this is a systemic problem, that’s going to have a much larger, much more pernicious impact on climate tech,” said Ethan Cohen-Cole, a former economist at the Federal Reserve Bank of Boston who now leads the direct air capture startup Capture6.
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