Investors are paying more attention to corporations' environmental, social and governance bona fides, and several banks have turned to solar investments as a key plank.

In recent years, banks have pursued a variety of renewable energy investments from building their own power plants to adding solar panels to their branches to signing agreements to purchase renewable power from off-site sources. In addition to boosting their ESG credentials, banks can also save money on electricity expenses.

Recently, Bank OZK announced it has secured approval to build its own solar plant, which it will break ground on soon and be running by the end of the year, said Tim Hicks, chief credit and administrative officer at Bank OZK. The bank will own the facility and have control of the amount of power produced. Bank OZK will monitor the power produced to ensure it is at least 80% to 90% of the bank's energy usage, said Hicks, but it could exceed the bank's power usage.

The bank will retain any revenue the solar plant receives. Arkansas law made owning a plant more advantageous than entering a power purchase agreement, Hicks said in an interview. Building a power plant provides more economies of scale than placing panels on individual locations, so one plant can offset all 40 Bank OZK locations in Arkansas, Hicks said.

"We have direct control of the size and when we put it into place, and we know that will directly impact our 40 locations," Hicks said. "Our investment has a direct impact on our usage of our buildings."

But the new facility will cost the bank upfront. Bank OZK will put an initial $6 million cash outlay into the building of the facility, but as soon as the plant goes online, the bank will receive an incentive tax credit of 26% and the facility will immediately begin making the bank money if it produces more electricity than the bank uses, Hicks said.

Building plants is only one of the avenues for reaching renewable energy goals. Cincinnati-based Fifth Third Bancorp entered a virtual power purchase agreement with SunEnergy1 to purchase 100% of the power generated at the Hertford County, N.C.-based Aulander Holloman Solar plant. Fifth Third pays for the solar power from the plant at a fixed rate. If the rate the utility is charging is higher than the fixed rate, the bank receives the difference.

Mike Faillo, director of ESG reporting and analytics at Fifth Third, said the bank benefits from the price differential, and the bank's fixed cost for the energy also serves as a partial hedge against rising energy prices. The bank also receives renewable energy credits, which can be exchanged in marketplaces, to help offset its energy costs, said Faillo.

Faillo said placing solar panels on branch locations in Ohio made less sense than ensuring the construction of a solar plant in North Carolina.

"With solar, you want to put solar facilities where it's sunny. And unfortunately, Cincinnati is not the sunniest place in the world, so that's why it makes more economic sense to put these facilities in more rural areas that get a lot of sunlight," Faillo said.

While banks are not using the energy generated in power purchasing agreements, the financial arrangements still deliver significant environmental benefits, said Steven Clarke, director of corporate clean energy leadership at Ceres, a sustainability nonprofit organization.

"Many of these projects literally wouldn't happen without these long-term contracts," Clarke said in an interview. "The guaranteed funding over an extended period of time is absolutely essential for lots of these large-scale projects. ... The environmental benefits and the financial benefits are very tangible and very real."

The nation's two largest banks, JPMorgan Chase & Co. and Bank of America Corp., have prioritized renewable energy generation to offset their emissions. Both banks have taken an all-of-the-above approach, using power purchasing agreements and investing in their own power-generating capabilities.

In 2017, JPMorgan set a goal that 100% of its global energy consumption would come from renewable sources by year-end 2020. A JPMorgan spokesperson said the bank would update its status in a forthcoming ESG report. Among its efforts, the bank has installed solar panels on 1,200 branches and signed a power purchasing agreement with a wind farm. The bank deployed four strategies: increasing energy efficiency of its properties, investing in on-site generation, buying energy from offsite sources and purchasing renewable energy certificates, said Alec Saltikoff, the bank's global head of sustainability and energy, at a conference in December 2020. Saltikoff said the bank's green projects not only work toward its ESG goal but also deliver returns.

"Every single project that we do, it does go through underwriting process, and the capital we employ has to make sense in addition to decarbonization," Saltikoff said.

Bank of America Chairman and CEO Brian Moynihan said in November 2020 that the bank had achieved full carbon neutrality. Bank of America has also deployed a variety of tools, including long-term renewable agreements, purchasing renewable energy credits and installing on-site solar capabilities to facilities, including office locations, financial centers and ATMs. The bank is expected to add more than 60 solar installations by 2022, and the bank estimates it will save $50 million over 25 years through the program.

"Nothing is going to solve this with a snap of fingers. It's a whole bunch of little things that add up to big things," Moynihan said, also pointing to the bank's efforts in investing in research and greening its lending portfolio as part of the bank's commitment to ESG.