Climate First Bank founder and CEO Ken LaRoe traces his path from conventional banking to values-based finance, and explains how the bank now finances residential and commercial solar and battery storage across 45 states.
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Sara Gutterman: Hi, I'm Sarah Waterman, CEO, Green Builder Media, and I have the privilege of being here today with my friend Ken Morrow, who is founder and CEO of Climate First Bancorp. So can you have pioneered the integration of environmental sustainability into the banking sector and your journey from establishing traditional banks to launching Climate First Bank of full service community bank with a mission to combat the climate crisis offers a wealth of insight into values based banking and sustainable finance.
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Sara Gutterman: So first, tell us about your transition and your journey from traditional banking to founding Climate First Bank with an environmental mission.
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Ken LaRoe: I started my first bank in 99 and it was a standard to start at scale. It exited investors get their, you know, payday. Is it go on. And it worked. And it was a really nice return. The timing was perfect because we sold to no. Six and didn't have the, you know, meltdown to go through. And then after we sold, I had a non-compete, so I couldn't go back into banking for a period of time.
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Ken LaRoe: My wife and I got a mini motorhome, and we circumnavigated the country. And before we left, my brother gave me Yvonne Shannon's autobiography, Let My People Go Surfing. And as many of the listeners will know, he's the guy that started Patagonia Clothing. And I read the book on that trip, and I actually got it finished in the first couple of weeks.
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Ken LaRoe: It was like, oh my God, this is it. This is what I got to do. I want to do something with the rest of my life that doesn't just make a bunch of people a bunch of money, but gives back. And making a bunch of people a bunch of money along the way is a really nice benefit. So that was the genesis of First Green Bay, and we filed the charter application.
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Ken LaRoe: Make sure you get the dates right. In 2008 and or maybe it was the end of 2007 and it took forever to get approved because that was right at the meltdown. The regulators were freaking out. They weren't granting any charters. And on December 22nd, 2008, they granted us the last charter granted in the state of Florida for nine years.
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Ken LaRoe: And it was the last granted in the US for, I think, five years. So it was a very rare piece of paper, and I've got it hanging on the wall right over there in the corner of my office. But it was an exceptional time to be starting a bank because of the meltdown. And all the banks were hemorrhaging.
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Ken LaRoe: And under pressure, regulatory pressure and loan portfolio pressure. But so it allowed us on the business side to really prosper and then put emphasis on the value side, which we didn't really know what that meant. Right. So we knew we wanted to do something environmental. And the bedrock product we thought would be consumer solar lending, to help people put solar on their their homes.
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Ken LaRoe: So we started developing the product, and that's a really long story and a really long progression. And it it took iteration after iteration after iteration. The whole time we're trying to figure out, well, what does it mean to be a value based bank, which is now a thing? It wasn't really a thing back then. And of course, ESG didn't even enter the common vernacular until 2018, about the time we sold.
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Ken LaRoe: So we were dancing on the Pinhead of of what is social, when we didn't know that that was the term that was going to evolve. What is environmental? We didn't know what the term was. Of course, governance is like, why aren't you running a company with good governance? So that one was that was always confused me. You know, what's what's the problem?
00:04:15:24 - 00:04:43:01
Ken LaRoe: Why is it that have to even be called out? But, that that was kind of the, the evolution and then the really big probably turning point or inflection was being asked to attend the annual conference of the Global Alliance for Banking on Values in 2012. And that's an international NGO that started in 2009, ironically, the same time we started.
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Ken LaRoe: And that really helped me understand what it meant to be a values based financial institution.
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Sara Gutterman: So tell us a little bit more about values based banking. What does it mean and how does it distinguish a bank like Climate First Bank from conventional financial institutions?
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Ken LaRoe: It's still, in my opinion, evolving. It. It has kind of turned into a term of art. And it's certainly something the Global Alliance for Banking on Values hangs their hat on. And they have really robust vetting to allow a financial institution into the organization. But it's not all environmental. It's not all social. Maybe kind of compare it to the B labs structure for vetting a company to become a B Corp.
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Ken LaRoe: And but there are plenty of financial institutions in the alliance that are very social center. Whether it's financial inclusion, racial financial equity, all of that stuff, to a bank like us that's very centered on environmental issues. We don't we don't neglect the other. But but we may not be boring as much resources into the other.
00:06:11:23 - 00:06:37:17
Ken LaRoe: But as an example, the what? Just put me on my ear back at 2012 was I was sitting at a table and I break out like at a, you know, a round table. And there were CEOs from around the world at the table, at different financial institutions, totally different structures and all that. And, the CEO of Brock Bank in Bangladesh was at that table.
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Ken LaRoe: And this was back in 2012. I don't I don't remember what their total asset size was, but it was it was pretty big. They were doing 8000 micro loans of bond. They had 8000 lenders who rode bicycles into villages weekly and collect the loan payments and extend new loans. That institution just about single handedly is bringing that country out of abject poverty.
00:07:08:23 - 00:07:42:06
Ken LaRoe: They have, like the largest egg farm in the country. They had 400 schools. It was just. And I went away going, oh my God, I'm not worthy to be sitting here. You know, with this amazing work and then fast forward to the US and the growth in the US of of membership into the organization. And you've got exceptional banks like southern Bank in little Rock, Arkansas, which is a cdphe.
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Ken LaRoe: Totally focused on the abject poverty of the Mississippi Delta, one of one of the poorest areas in the world. Honestly, and certainly probably the poorest area of the U.S.. But that's all ticket the boxes, you know, pretty much it's not taken the the e boxes. So to me, it really means a financial institution that's focused on doing good as well as putting the actual viability.
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Sara Gutterman: I'm sure you were bumped up against a tremendous amount of skepticism over the last two decades as you've been doing this work. Talk about how you've been able to navigate and overcome this skepticism. As you've established, these two sustainable values based banks now, and especially in light of changing political landscapes and and climate right now, where climate action is not prioritized, how are you maintaining your commitment to your mission and, your advocacy to environmental and social practices?
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Ken LaRoe: Well, it certainly has changed. When we started First Green Bank, and I remember a conversation I had with one of the one of our shareholders, who was a shareholder at my first bank, remember, just a plain vanilla start at scale at sell it, make a bunch of money. He made a bunch of money. He he invested a whole bunch in my first bank.
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Ken LaRoe: So I went to him to invest in the second bank and he said, Ken, I'm in, but sign me up for $700,000. And it's like, whoa, yeah, that's this is going to work. And, he said, but, you know, I gotta tell you, that green stuff, that's all a bunch of bullshit. But it is the best marketing I've ever seen.
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Ken LaRoe: And it's like, okay, I'm your check. Let me go. So it it was that was even before the bank was open. I was getting that level of feedback, but it wasn't offensive. And it wasn't in your face. And it was it was people that were maybe very conservative, but I still feel are good people. This stuff today is off the rails.
00:10:03:01 - 00:10:34:24
Ken LaRoe: It's completely off the rails. And it started for us with the election of Ron DeSantis as governor. So it started for us a long time ago. And, the foolishness and we're a Florida state chartered bank, so we are directly impacted by the laws of the state of Florida. And when they started the whole culture war thing, it like I said, it's just it's off the rails.
00:10:34:26 - 00:11:05:06
Ken LaRoe: So how do we navigate it? We just keep our head down and and keep doing the right thing. We're not going to deviate from doing the right thing. I've got 734 shareholders who I'm very beholden to. They're almost all a friend at this point. If they weren't a friend when they invested, they become a friend. And I'm going to certainly take care of them, but I'm certainly going to take care of all the stakeholders, not the least of which is Mother Earth.
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Sara Gutterman: Now, that's a nice dovetail into my next question for you, which is looking at some of the specific things that Climate First Bank is doing right now. I know that you've made significant strides in financing solar installations across multiple states. So can you talk a little bit about the impact of those initiatives and the bank's plans for expanding renewable energy financing and other sustainability project financing?
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Ken LaRoe: So, yeah, the, the initiative for consumer Solar, we we I didn't have anything to do with it because I don't I don't know anything about ones and zeros and, or qubits or anything else, but our, our CTO wrote all our proprietary code for our product. And that is critical in this space because all of the deals are installer driven.
00:11:59:04 - 00:12:33:19
Ken LaRoe: So the installer wants their sales rep to sit down at the dinner table, present their pitch, and be able to walk out with a contract. The only way to walk out with a contract is either cash or finance, so that product that we developed way back at first grade, back in 2009 and kept tweaking and tweaking and tweaking right about the time we sold the bank, the fintech industry figured it out and said, oh my God, we can take that and digitize it, give it instant, you know, a three minute application, instant credit, decisioning.
00:12:33:21 - 00:13:02:16
Ken LaRoe: And they blew up right at the time we sold. So when we started this bank, the objective was we've got to we've got to have that product and we've got to put the the predatory fintech lenders out of business because they are bad. They charge undisclosed dealer fees, which have hit as high as 52%. And so the installer passes that on to the consumer undisclosed.
00:13:02:19 - 00:13:38:25
Ken LaRoe: So they're paying twice as much or you know, 50% more for their, for their solar array. So we built that product in May of 2022. By January. Well, by the end of that year, we were at 10 million a month in production. And, we weren't allowed to go out of the state of Florida. So all the loans were for in the state of Florida, effective June 1st of last year, we came out of what's called the de novo period, which is a a banking, period of heightened scrutiny with a new charter.
00:13:38:27 - 00:14:00:22
Ken LaRoe: And we were allowed to, to land nationwide. So we've rolled out nationwide. We're now in 45 states. It it looks like this month, a third of our business is going to be Florida. All the rest is going to be elsewhere. We're getting a huge amount of volume out of California, even with their changes in the law.
00:14:00:22 - 00:14:30:00
Ken LaRoe: We're getting a bunch out of Texas. Arizona, ironically enough. And then up in the northeast, the New York, area, we've got some really cool partnerships up there. So we have put solar, we have financed solar on the roofs of 3700 homes in America since May of 2022. So, you know, three years and it's building the whole time.
00:14:30:00 - 00:14:55:27
Ken LaRoe: It's like a geometric progression. So that's just so exciting. That's just residential. Now we've also done about 80 million in commercial, which could be everything from, the gal who puts solar on the roof of her dental office. Or it could be the guy that owns a bowling alley, or it could be a community solar array in New York.
00:14:55:29 - 00:15:18:01
Ken LaRoe: And, we've done a number of those. We've done a number of large scale battery energy storage systems, which is a really cool thing. And my people are subject matter experts, and solar renewable stuff. So we, we kind of started becoming the go to source for the whole industry. It's it's really exciting.
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Sara Gutterman: Now looking ahead, what are your aspirations for Climate First Bank, and how do you envision its role in addressing the climate crisis through financial services?
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Ken LaRoe: Well, what comes to mind with that question is what we're calling our 10 to 10 plan. And that's to be $10 billion in ten years, and our stock value be ten times what the shareholders originally paid. We're we crossed $1 billion about three weeks ago. And that's ten years from 2022 is when we put the plan together.
00:15:54:15 - 00:16:30:18
Ken LaRoe: So by 2032, we're going to be $10 billion. Our stock value is going to be $100 a share. And that's financial metrics, right. So it's like, okay, that's great. The shareholders are going to be happy. But how does that play into the values piece. You know how to and it's really in my mind overly simplistic. Maybe I shouldn't oversimplify it, but at $10 billion we're impacting a lot of lives where we have tens of thousands of customers.
00:16:30:18 - 00:16:54:29
Ken LaRoe: At that point, it's just a way bigger platform to preach the gospel. And our shtick, if you will, is to influence and educate. This is not just to provide that solar loan, but to provide that to teach someone why they need solar and why it makes a difference. And there's another body of knowledge which you're very familiar with.
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Ken LaRoe: And, it's been developed very rapidly. And there's, a nonprofit called Topo Finance. Paul Point, Esther is a guy that started it. He's done deep research into what, moving your banking business from a traditional bank that don't. I'm not going to call him names or call him evil or anything, but from a traditional back to a values based bank and what it it how it impacts decarbonization, it it's a maze.
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Ken LaRoe: It's huge. It's like you move $100,000 from a traditional bank to value space bank. It's equivalent to something like 80 cross-country flights. It's it's just huge. And that is becoming more and more common knowledge. And when it does, people that care are gonna vote with their pocketbook. And that $10 billion, we got a lot of voters.
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Sara Gutterman: And my last question. Any tips, tricks or hacks that you'd like to share with our audience in terms of what they need to be looking for with respect to the banks that they engage with and utilize for personal and professional, reasons.
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Ken LaRoe: I think if a consumer is interested, it's probably a minute and a half worth of research. Go to, find out if a bank is as b b lab certified as a B corp, find out if they're a benefit corporation, which I think there's 32 states of the country that now have legal benefits Corporation status. Find out if they're a member of the Global Alliance Alliance for Banking or Values.
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Ken LaRoe: That's really the the big three, but mostly the Gaby the global. As for Bank of values and and B A B B Corp certified bank.