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Bank Failure Impact on Clean Tech Finance 

March 20, 2023

The climate tech sector is worried about funding options following Silicon Valley Bank’s (SVB) collapse. According to Axios, SVB was “a pillar of the start up ecosystem…[with] roughly 1,500 venture-backed startup clients working in climate tech.”  

Why it matters: Climate tech has becoming increasingly important as businesses seek to participate in efforts to mitigate climate risk and meet international carbon reduction commitments. Over $350 billion in tax incentives from the 2022 Inflation Reduction Act further spurred investment in clean tech. A significant constriction in financing availability could put the brakes on climate innovation.

Who finances clean tech: Small start ups have turned to regional and community banks to finance their ventures. As Tom Steyer, former presidential candidate and co-founder of a climate investment firm, explained to Bloomberg:

“Most banks, they’re banking against assets or cash flow. When you think about a startup, which has a good chance of having neither, you understand why many banks shy away. They chose to understand and work with startups.”

Yes, but: Given that recent banking troubles were not the result of any underlying credit issues, many market participants believe that losing SVB as a key climate tech funding partner will result in only a temporary pause. With ample tax incentives and other financial institutions likely to recognize key opportunities, healthy start ups might continue to find the financing they need. According to another venture capitalist:

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