Who Are They?

By: John A. Lanier

I love Hannon Armstrong’s simple and direct investment thesis: “We will earn better risk-adjusted returns by investing on the right side of the climate change line.”

When I was in high school, I was terrified of being embarrassed. I’m sure this fear is quite common, but my embarrassment-phobia was particularly acute. I didn’t receive teasing very well, and I was sensitive by nature. In particular though, because I prided myself on being “smart,” I didn’t like being perceived as ignorant or out-of-the-loop on things. When people would be talking about something I knew nothing about (but thought I should have), I would always do that thing where you nod along and hope that no one calls you out for being clueless. It could have been an acronym they used that I didn’t recognize, or a reference to an actor I hadn’t heard of before. Pop culture was a blind-spot for me, so I was always alert when conversations would veer in that direction. And I grew up on classic rock, so I never knew what songs were currently popular.

I’m still not sure why it was so hard for me to just say “what is that” or “who are they?” Fortunately, I’ve grown up a bit, so I don’t hesitate to ask those questions now. If it results in a good teasing every now and again, I can finally handle being the butt of a joke!

Even with more years under my belt, I still have that “why don’t I already know about this” experience quite often. A recent example was a couple of months ago when I first learned about the investment company Hannon Armstrong.

To be clear, I’m not surprised if you’ve never heard of them either. They aren’t some massive company, and there are a lot of investment companies out there. Since I spend pretty much every day thinking about climate change though, I probably should have already known about this publicly traded company that is exclusively focused on investing in climate solutions and climate resiliency.

Their investments are broad in substance, including equity, lending, joint ventures, and land ownership, and they focus on three different markets: behind-the-meter (i.e. energy efficiency), grid-connected renewables, and sustainable infrastructure. In real-world terms, that means they might finance the installation of windmills, buy land suitable for solar farms and then lease it to utilities, or invest in projects that mitigate stormwater runoff into public waterways.

I love their simple and direct investment thesis: “We will earn better risk-adjusted returns by investing on the right side of the climate change line.” Further, this thesis informs not just their investments, but their operations as well. They disclose a detailed environmental metrics report each year showing water use, waste, energy consumption, and scope 1-3 emissions (here’s their 2018 report – note that 2019 hasn’t been released yet). Sure, investment companies aren’t likely to have significant environmental footprints, but this shows that Hannon Armstrong is still walking the talk.

If you want to dig in deeper, here’s the PDF of their latest investor deck. They may never become a household name like Google, Bank of America, or Amazon, but they’re definitely a company that more people need to hear about!