How a Florida bank is embracing the green banking program
How many people can say they are setting up a bank – for the third time – in their early 60s in the hope of revolutionizing the financial industry? Kenneth LaRoe, Founder and CEO of Climate First Bank, thinks he’s doing just that.
LaRoe’s big idea? Climate First is the only bank to be net zero emissions on the day it opens, and aims to be net zero for the life of the bank. One of the promises made by Climate First is that it “will never invest in the extractive industries”.
Climate First launched on June 1, 2021 in St. Petersburg, Florida, and currently offers a range of personal and business banking services, including online banking, cash management and – what the company says it does. ‘it will do the best – durable loans.
“The sustainability status quo is no longer an option,” said LaRoe The financial brand . “The only rational goal for perpetuating humanity is to actually reverse the damage caused by our dependence on carbon.”
To celebrate the bank’s launch, Climate First Bank hosted a grand opening called “Endless Solar”. One of the main attractions was a Tesla, filled with cash, parked inside the bank. When customers arrived they guessed how much money was in the car. Whoever guesses it must keep the electric vehicle.
( Dig deeper: Is the environmentally friendly “green bank” a sustainable strategy? )
Climate First strategies will build on
Even though his strategy is unconventional for a community bank, LaRoe knows he is up against some big players in the space. Chase, Goldman, Citi have all committed significant resources to ESG (environment, social, governance) efforts, not to mention fast-growing neobanks like Aspiration. To keep pace, Climate First Bank will need to perform well in at least 10% of banks and credit unions in Florida, LaRoe believes.
LaRoe pulls most of his green strategies from his bank of “Drawdown,” a book by Paul Hawken and Katharine Wilkinson, which he says is the “most comprehensive plan ever to reverse global warming.”
While the book details 100 of the most proactive strategies for any organization or individual to roll back their impact on climate change, LaRoe says Climate First will focus on 12 to create what he calls “the built environment.”
- Wind turbines (Onshore)
- Reduction of food waste
- Plant-rich diet
- Solar on the roof
- LED lighting – Household
- Solar water
- Heat pumps
- LED Lighting – Commercial
- Building automation
- Smart thermostats
- Smart glasses
LaRoe goes on to explain that initiatives like the last seven listed above can all be easily influenced by a community bank lending policy. The products can be developed to finance renovations or upgrades of residential and commercial projects.
“In addition, developers and builders can be encouraged and incentivized by pricing to build projects that meet certain measurable standards such as LEED, Green Globes or Florida Green Building Coalition,” he says.
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Changing what people believe can’t change
LaRoe says he wants to challenge the traditional concept of lending and get clients to integrate different sustainable techniques into their physical infrastructure.
“I tell people I’m a rabid environmentalist, even though in retrospect I really didn’t know what I needed to know. I am also a rabid capitalist. I think the two have to go together.
– Ken LaRoe, Climate First Bank
For example, when an ESG office told him that he would not approve an investment in the bank because LaRoe was planning to lend to convenience stores and gas stations, he decided he would try to influence his target customers.
“The [ESG office] said ‘this is dirty energy’ and ‘why should you support something that perpetuates the problem?’ LaRoe says, adding that her team quickly realized they could fund convenience stores as long as management install solar panels and charging ports for electric vehicles.
And when a convenience store owner applied for a $ 5 million loan the following week, he didn’t complain about LaRoe’s claim. The owner has admitted he won’t be pumping gasoline in 20 years.
LaRoe says he doesn’t plan to immediately integrate green deposits into his product line, which has sparked most of the ESG talk in the financial sector.
“I would really like to incorporate green deposits, I don’t know what that looks like yet,” he explains. Green deposits are consumer deposits that a financial institution guarantees will go towards sustainable investments and loans.
( Read more: The bank must take a stand on difficult social issues)
The long road of a banker to the green
Not all financial institutions go green yet – and they don’t necessarily have to either. Even if consumers express a desire to see social activism on behalf of their bank, that does not mean that a lack of activism would be a barrier for them.
JD Power found that “despite how important ESG seems to most consumers, they readily admit that they haven’t looked very carefully at which companies actually meet these metrics.”
That may be the case right now, but LaRoe isn’t looking back now. He has invested too much personally and financially in a cause that fascinates him.
Outside the frame:
Even though banks and credit unions need to lend to non-green businesses, it’s important to think creatively, like getting convenience stores to install electric vehicle chargers.
LaRoe’s financial career began in 1999 when he founded Florida Choice Bank. He sold it in 2006, in what he considers one of his luckiest shots. And although he rewarded his investors with some of the money from the sale, he was not satisfied.
After a ten-week trip around the country in a motorhome with his wife following the deal, LaRoe realized he wanted to start something new, a mission that would fulfill his desire. to do something for the environment. He attributes it to a book that his brother gave him two weeks before his departure for the trip: “Let My People Go Surfing”.
This was the genesis of First Green Bank, LaRoe’s second startup. He wanted to start a project that wasn’t just about making money from people, he says. The bank was launched a week before the 2008 stock market crash that triggered the financial crisis. First Green would be the last bank to be chartered for the next nine years in Florida.
Although First Green Bank survived the crisis, it took a struggle to make the environment-focused strategy feasible.
The LaRoe team tried to set up a loan program where anyone developing sustainable projects could get interest rate reductions. It failed – it was in 2009 and not many people were intrigued by projects like this.
Then he tried a solar loan program. It has generated a bit of interest, but not enough to satisfy investors. Eventually, he walked away from the bank again in 2018 and made another trip across the country with his wife, which ultimately inspired Climate First Bank.
In 2021, the world might be ready – even impatient – for Ken LaRoe’s quest for an environmentally aligned bank.