Climate First Bank: Keeping the Green Faith, Putting Politics Aside

For a large percentage of bankers, the recent national election results may have been good news, but not for veteran banker Ken LaRoe.

LaRoe is founder and CEO of Climate First Bank, a green bank based in St. Petersburg, Fla. Climate First, which opened its doors in mid-2021, is dedicated to putting “its customers and the environment first,” and both eschews loans to activities it considers detrimental to the environment and has specialties in consumer and commercial solar electricity lending. The bank has reached $850 million in assets.

Naturally, the election of a president whose panoply of mottoes includes “Drill, baby, drill” and who favors unwinding the Inflation Reduction Act and its renewable energy features, was not good news.

In a public LinkedIn post addressed to his bank’s staff, LaRoe spoke of frustration, even anger, with the election results. But he wrote that “This is a clarion call. It is a reminder to take a moment, take a breath, remember what our values are and what our mission is.”

On Election Day, early enough that even projections weren’t posted yet, LaRoe did an interview with The Financial Brand. With a race that appeared to be a dead heat at that point, he contemplated the possibility of a win by President-Elect Trump.

To LaRoe, in his words, much of what he believes in has been “vilified and politicized.” But he considers environmental risk and sustainable energy to be above politics.

“Maybe at the end of the day, it doesn’t matter who gets elected because there’s so much momentum, there’s so much desire for renewable energy, that we just keep our heads down and keep doing what we do and doing the right thing,” says LaRoe.

As evidence, LaRoe points to the juggernaut of demand for solar energy financing. He says the field is rife with hucksters and financiers who bend the tax law in structuring deals. Customers from all 50 states have found his bank in searching for financing, he says, including some people in red states like Texas where both solar and wind energy are big. Indeed, in recent election period coverage energy analysts have spoken of the likelihood that even a rollback of tax incentives might be surpassed by both consumer and business demand for renewable alternatives.

“I think the movement is very real this time,” says LaRoe.

Second Time at the Green Banking Business

In June of this year Climate First exited official de novo status. The young bank’s formation was vindication, to LaRoe, of his bank’s aspirations. The bank’s slogan is “Bank like tomorrow depends on it.”

Climate First is LaRoe’s second green bank charter, and the third bank he’s started. The first green bank, also chartered in Florida, had a difficult birth. LaRoe says that when he filed the application, at the tail end of the financial crisis, to open what became First Green Bank, regulators “were just stonewalling and dragging” through the approval process.

LaRoe recalls being told, “Look, Ken, this ‘green thing,’ that’s all a niche, and we don’t do niche banks’.” LaRoe says the only factor that spoke to the regulators was financial projections.

“They viewed our values proposition as nothing more than a distraction,” says LaRoe.

The vindication came later. LaRoe and fellow owners had sold First Green to another bank and the specialty went by the boards. He and his wife, Cindy, were taking a break going cross country in an RV and LaRoe began cogitating. He felt he hadn’t done all he wanted to in the green banking arena. Temptation to start a new green bank grew, but he says he dismissed the idea. Why? He says he thought, “I’m too old and it’s too hard.”

LaRoe’s wife changed his mind. He credits the Climate First name to her. He initially thought “Climate First” was polarizing. She agreed, and said it had to be that way, to evoke the mission in an “in your face” way.

So LaRoe plunged back into banking.

This time around, he recalls, green banking played better with regulators. He says state chartering officials greeted the application enthusiastically — a surprise since he doesn’t consider Florida a progressive state. Regional FDIC officials, he says, “talked more about the mission than about the business plan. It was amazing.”

Investors have also been receptive as well, says LaRoe, who has been going through another funding round.

A good deal of interest comes from “believers.” This includes a couple of ESG mutual funds, according to LaRoe, as well as some family offices “that would not invest in Climate First if we didn’t have the climate element.” Climate First is a B corporation, a for-profit company that meets standards for sustainability and environmental performance standards.

But LaRoe says that some investors have told him squarely that they don’t believe in climate change, but that they think it’s a good bank with a good niche and that LaRoe will make them money.

“OK, fine,” says LaRoe, expressing his state of mind. “If that’s why you want to invest, that’s fine too.”

Also meaningful to LaRoe are those depositors, from all over the country, who bring funds to the bank. He says they like to know “where their money sleeps at night.”

Running a Green Bank Day In, Day Out

All kinds of arguments come up during loan committee meetings. Getting paid back is always a concern, but so are loan concentrations, unconsidered risks and customer management skills. That comes up in all banks. There’s another dimension on the table at Climate First.

A juicy loan, more than once, has been on that table, all set to go. And then someone in the room has an epiphany.

“I’ve had a lender say, ‘Whoa! Whoa! Whoa! Wait a minute. We’re Climate First Bank. We’re not doing that loan!’,” says LaRoe.

What doesn’t pass the committee that’s come up? “Dirty energy” is one example. Another would be something like a sod farm, because “it’s an extractive industry that’s terrible for the environment,” says LaRoe.

The arguments aren’t just over turndowns. Sometimes someone at the table stands up to say that the bank ought to stretch.

LaRoe says that the bank maintains classical underwriting standards — “going back to the East India Company” — but that when someone suggests working harder to mitigate the risks of a mission-friendly loan, he’s game to try.

While residential solar makes up a big portion of the bank’s lending, the roster also includes commercial solar, environmental and climate protection solutions, affordable housing, local manufacturing, and health and well-being credit.

How Wide Open is Climate First’s Door?

Can someone who is not a believer in the green case get hired, let alone survive, at Climate First?

LaRoe gives a nuanced answer.

“It really is disruptive if someone on the team doesn’t believe in the mission,” he explains. “Maybe they think climate change is a hoax. Or maybe they don’t approve of our LGBTQ affinity product. It creates a problem.”

In the interview process, he says, managers hiring make it clear what the bank’s philosophies are. “We make it crystal clear what we’re all about, and it’s in our name,” says LaRoe. “If you’re uncomfortable, then you probably shouldn’t join us.” He says he can’t imagine an outright “climate denier” or a “science denier” likely wanting to work for Climate First.

He notes that while most staffers are Democrats or Independents, there are some Republicans who have proven to be valuable employees.

On the other hand, over his time in two green banks, says LaRoe, “I’ve had people walk into my office and say, ‘I’m out of here! I don’t believe in what you believe in. This is foolish. I hate your politics. I’m leaving!'”

LaRoe says that he lost a senior officer at his first green bank after such a discussion.

He adds that when he recruits, he looks first for solid banking experience. But then he looks for an additional dimension.

“Maybe an interest in clean energy, or social justice, or racial equity,” says LaRoe. “Maybe it’s a passion project for them. To me, that would really resonate.”

Teaching Others How to Fish in Green Seas

The bank’s solar financing program has been expanding since regulators took it out of de novo probationary status.

Over about two years, the bank made about $130 million in consumer solar loans in Florida alone. Out of state has been a matter of a few loans here, a few there, but now nationwide expansion is underway on both the commercial and consumer sides.

One feature of the consumer program has been the bank’s insistence on financing only deals with vendors and installers that they know to be trustworthy. LaRoe says state attorneys general have been active in going after solar power shysters — on a video call, he pulls out a thick wad of court documents relating to some of those cases, which he tracks.

The bank developed its own software to process requests for consumer solar loans online, with nearly instantaneous decisions. After the bank was using its own technology, someone pointed out that the tech could be helpful to other lenders as well. The group running that tech was separated into a fintech subsidiary called OneEthos.

Small tranches of loans have been sold into a developing secondary market for solar credit, with the bank retaining servicing. Most of the loans are portfolioed at this time.

Climate First has also started running white label solar finance programs for other institutions.

So, in spite of electoral disappointment, LaRoe has a long to-do list. And he’s getting to work.