Over the course of the first six months of Capital Institute‘s Year in the Life of a Regenerative Bank project, we have talked to the stakeholders of First Green Bank about the critical challenges they face as the bank works to embed its regenerative-values-based mission into its day-to-day operations and to balance the profit motive against the deeper motivation to participate in the healing and regeneration of an economy once dominated by citrus and now by often-rampant real estate development.
We checked in with First Green Bank CEO Ken LaRoe at this midpoint in our project for a frank discussion about both the progress the bank has made and the inevitable setbacks it has encountered as its values bump up against real-world constraints. Ken remains committed to participating in the growing global values-based banking movement, and equally so to infusing that movement with a uniquely American style of regenerative banking.
The Living Building Challenge
In June, after the Year in the Life project visited First Green Bank with our mentor Stuart Cowan, a Living Building Challenge advisor, Ken committed the bank to exploring the possibility of constructing Florida’s first Living Building.
In an exciting development, the bank is now in early talks with the CEO of a closely mission-aligned not-for-profit client to partner in the construction of a multistory joint headquarters in downtown Orlando. If this partnership goes forward, the synergies that could be realized between the bank and this organization as they come together “at the edge“—at the interface between the for-profit and not-for-profit world—are seemingly limitless.
What’s more, this nonprofit is planning to establish a social enterprise consultancy with which First Green Bank could potentially play an important strategic and or tactical role. “It would be cool,” Ken muses, “if we could do it under our financial holding company structure as a B Corp.”
Guiding Bank Customers on Their Regenerative Journey
How should a bank with a mission to practice regenerative finance reflect that mission in how it chooses its customers? First Green Bank is exploring this pathway, and has already formalized an exclusion list of customers it will not bank including extractive industries (like peat-mining, fracking, and water bottling), pornography, and strip clubs. However, in the gray areas, decisions are made on an ad hoc basis with Ken often having the deciding vote. For example, he recently vetoed what would have been a loan to a gun and munitions manufacturer although many on his loan committee favored the deal. He also said no to extending an auto loan to a customer for the purchase of a luxury gas-guzzler. Nonetheless, the bank does lend to many businesses that could not be defined as values-aligned. For example, it has a profitable portfolio of convenience store loans.
But that very diverse mix of clients—some values driven, many not—presents a unique opportunity for the bank to educate and influence its non-values-aligned customers by actively engaging them with its mission and by encouraging them to operate more regeneratively. If First Green Bank steps up its efforts to assume that role its regenerative impact on the Central Florida economy could potentially increase exponentially.
Tracking Growth of Values-Based Customers
First Green Bank recently converted to a new core reporting system that will facilitate its ability to track progress in growing its values-based customer portfolio. The bank is working in parallel to ensure that it has the data it needs to do authentic reporting by requiring all staff with customer contact to gauge commitment to the bank’s values, based on how the customer responds to a one-page survey. The bank is also making a concerted effort to grow its values-aligned customer base targeting nonprofits and faith-based organizations, renewable energy companies, organic farmers and food producers, and by extending low-interest-rate loans for solar installations and for high-fuel-efficiency vehicles. It will be measuring its progress against the Global Alliance for Banking on Values Scorecard.
Supporting the Regenerative Journey of First Green Bank Staff
The bank is also working hard to nurture “values ambassadors” among staff. One approach has been to offer financial incentives to staff to recruit more values-aligned customers. This traditional reward system is beginning to producing results and helping staff to focus more on values. Yet Ken continues to search for ways to genuinely inspire “empowered participation” among staff members beyond financial incentives.
To support Ken’s staff empowerment efforts Year in the Life will visit the bank in January with two mentors: Vincent Stanley and Carol Sanford. Vincent, Patagonia’s Director of Philosophy, travels around the world meeting with Patagonia staffers to connect them with the company’s mission. Carol—an author and regenerative business educator—works with enterprise leaders and their staff with a unique approach that calls on them to reflect on, and then contribute, their individual “essence” to catalyze transformative change in their organizations.
“Trust your stakeholders as autonomous adults with their own needs and strengths. Trust them, and give them problem-solving responsibility. Let them link their sense of selves as whole people — embedded both in their community and in the natural world — to their work and you will see incredible outcomes.” — From The Responsible Business by Carol Sanford
Managing Investor Expectations
Ken has engaged in a delicate balancing act in recent months, asking for patience from certain large investors to give him the time required to make meaningful progress toward the bank’s ambitious goals. “With Florida Choice,” Ken explains, “I had all of the initiative and desires in my heart of hearts to operate values-aligned, but I was afraid to implement them because of shareholder expectations. With First Green I thought there would be a lot less compromise, but it has turned out to be a whole lot of compromise at the end of the day with shareholder pushback.”
As the end of First Green Bank’s seven-year de novo period approaches in February 2016, Ken has begun to feel increased pressure to find a suitor for the bank. He is thus relieved and gratified that, at the August board meeting, the majority of members agreed to support his 2020 strategy—to give the bank the breathing space over the next five years to grow to $1 billion in assets while, redoubling its commitment to its values, with the goal of selling to a values-aligned banking entity at the end of that period.
But is there another possible strategy that would allow the bank to continue to operate beyond that date as an independent entity in the event that a values-aligned suitor is not found? Shortly after his board meeting, The Year in the Life introduced Ken to Integrated Capital Investment Advisor Leslie Christian to discuss those alternative options.
Leslie asked whether the bank might instead be kept local and its success measured by how much it deepened its values commitment to its community over a long-term horizon. Or did Ken feel the best measure of success would be to grow and sell the bank at an attractive multiple to another bank? Those are questions Ken will be pondering.
It was Leslie’s view that there are more and more investors who would be interested in a perpetual investment in an entity like First Green Bank. And, she said, they are among a growing community in a new world of investment that are questioning whether “grow to sell” strategies are in the best interest of the long-term health and sustainability of our economy.
We look forward to more thoughtful and thought-provoking discussions—with this ever-questing and self-reflective CEO, his bank’s diverse stakeholders, and our Year in the Life mentors—as the second half of this year in First Green Bank’s regenerative journey unfolds.
KEYWORDS: Finance & Socially Responsible Investment, first green bank, Field Guide to Investing in a Regenerative Economy, Ken LaRoe, Regenerative Finance, regenerative economy, Susan Arterian Chang, john fullerton, Hugh Kent, King Grove Organic Farm, Living Building, Global Alliance for Banking on Values, carol sanford, vincent stanley, patagonia, Annette Snedaker, regenerative banking, regenerative bank, Capital institute
This post was originally published on 3BLmedia.com
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