With Climate Week in full swing, companies are stepping over themselves to prove they have the climate action chops needed to help the world avoid catastrophe. But while many corporations mostly talk about goals and aspirations, a company based in Annapolis, Maryland stands tall with its actions and performance. And a key reason why Hannon Armstrong has emerged as a climate action leader in the U.S. business community is because of its laser focus what it describes as “environmental literacy.”
Hannon Armstrong is the first U.S.-based public company with a business model centered around investing in projects that either reduce carbon emissions or bolster resilience to climate change. The company has grown largely by offering capital to companies in the renewables, energy efficiency and sustainable infrastructure industries.
An investment firm that makes money from such projects as energy storage or solar thermal power generation may sound far-fetched, but this is business as usual for Hannon Armstrong. Investors have certainly been buying into the company’s mission since it went public earlier this decade – and according to the company, about one-quarter of its stock is owned by investors focused on sustainability. If you bought stock during the company’s IPO in April 2013, that investment would be worth 250 percent more today. The company’s market cap currently hovers around $2 billion.
According to the company’s CEO, Jeff Eckel, its success lies in the fact that it has not diverted from its core strategy – and relies on everyone in the company to believe in the fight to take on climate change. “We will earn better risk adjusted returns by investing on the right side of the climate change line,” he said during a recent interview with TriplePundit. “It’s simple in concept, but very tricky in practice. But that bottom line is that we’ve simplified our mission, which is to use finance so that companies can accelerate the adoption of clean energy technologies and other sustainable solutions.”
One factor that ensures strong cross functionality across Hannon Armstrong is that management and employees regularly develop “Key Strategic Initiatives” or “KSIs.” At the beginning of each year, the company’s leadership team identifies three to five large cross-cutting initiatives that could help the company grow its business. Teams are then put together to work on each project, with regular updates to management. “These KSIs are not easy, so you find that they really drive creative solutions and collaboration. It’s an invigorating experience because you find yourself working closely with people that you wouldn’t normally partner with in your day-to-day role,” said Hannon Armstrong spokesperson Gil Jenkins.
But in listening to Eckel, it is clear that Hannon Armstrong would not be succeeding in its wider mission – which of course, includes, keeping shareholders happy – if it were not for the employees’ “environmental literacy” that he insists is crucial to keep the company thriving.
Being aware of the various challenges and issues arising from climate change is partly what it takes to ensure someone is a fit at Hannon Armstrong. But remember, this is an investment firm and numbers matter. Sure, Eckel and the employees of Hannon Armstrong feel their work is important to save the world, but in the end, the company’s executives and employees are all running a business: There’s no point investing in projects that don’t make any financial sense.
Jeff Eckel, CEO of Hannon Armstrong
To that end, Hannon Armstrong employees must be able to evaluate a project and calculate all those pesky statistics associated with that potential investment, including, of course, carbon emissions. Projects not only need to have a viable rate of return, but at a minimum, they also have to be carbon neutral. “It definitely takes some sophistication to do all these calculations with rigor and accuracy, but it’s important,” Eckel explained. “A project has to pass our carbon count investment screen where we look at the carbon emissions avoided per $1,000 dollars invested. If an infrastructure project pencils out as just being carbon neutral, then that project must also have another measurable environmental benefit, such a reducing water consumption.”
To be clear – environmental literacy at Hannon Armstrong is not just about numbers crunching allowing employees to hold their own with the types that work for those famous acronyms IPCC, CDP or CARB. The company regularly brings employees together so that everyone is updated on the business and political landscape, both of which can have an impact, at any time, on the broader clean technology sector across the U.S.
“Every quarter, we get the entire company together, and we go through relevant global and U.S. climate data,” said Eckel. “We discuss where the hotspots are, and what’s going on with the politics of climate in the U.S. Then, we talk what we’re hearing from our shareholders, updating on which shareholders really care about ESG, and which don’t. That’s mixed in with practical discussions on how the company is doing and where we are looking to invest."
These climate science, policy and innovation updates are not a top-down discussion – at one time, Eckel usually conducted them, but this culture of environmental literacy at Hannon Armstrong means everyone is well-versed in this space. “I delegate parts of this meeting to a different member of the staff each quarter; now, I don’t have to do it anymore!” Eckel said. “And there’s a definite benefit because people get to stand up in front of the company to present their research and analysis – which naturally drives more buy-in across the organization.”
Hence there’s a dynamic at Hannon Armstrong that is impressive considering it invests in what is still a nascent, 21st-century sector – but the company has been moving ahead by instilling this culture of environmental literacy largely by using proven, 20th-century tactics.
For example, employees are encouraged to participate in the company’s book club. “There’s a monthly book reviewed by someone on staff and discussed by our book club, and the topics could be on either side of the climate change line,” Eckel said. “I made the first books we chose this year very chart-heavy, though, so employees couldn’t listen to them in the car.”
Speakers are also invited to share their insights with Hannon Armstrong employees on a regular basis. Guests have included NGOs such as The Nature Conservancy and organic crop consultants willing to share their views on agriculture. Eckel has made it clear to employees and guests that all points of view are welcome, including those who voice climate skepticism or express the positive aspects of fossil fuels.
Learning also continues outside the office through local volunteer projects. The company’s community engagement efforts include installing solar panels on low-income homes (as in a home in Southeast Washington, D.C., shown above); working with the Smithsonian Environmental Research Center's efforts to understand how climate change impacts wetlands; and underwriting programming for a year-long series of climate lectures in the Annapolis area.
One result of this ongoing emphasis on environmental literacy is that there is now a library at Hannon Armstrong’s Annapolis headquarters, one that Eckel described as having the “greatest hits of the past 40 years.” Providing resources, such as this book collection, is important to the company, as Eckel made it clear he doesn’t want learning to stop anytime soon. Ever.
“I believe that rigorous ongoing engagement and connection with the world we all share is one the key factors that has driven our success in the sustainable investment industry over the decades,” Eckel said as he wrapped up his interview with 3p. “If we are going to continue to be a leader in sustainable infrastructure in the years ahead, we’ve got to keep studying and learning on all that relates to the economics, the politics, physics, and the reality of climate change.
Jeff Eckel is one of the finalists for 2019 Responsible CEO of Year Awards, which will be announced the evening of October 29 during 3BL Forum: Brands Taking Stands – What's Next at MGM National Harbor, just outside Washington, D.C.
We're pleased to offer 3p readers a 25 percent discount on attending the Forum. Please register by going to the 3BL Forum website and use this discount code when prompted: NEWS2019BRANDS.
Image credits: Hannon Armstrong
Leon Kaye has written for TriplePundit since 2010, and became its Executive Editor in 2018. He's based in Fresno, CA, from where he happily explores California’s stellar Central Coast and the national parks in the Sierra Nevadas. He's worked an lived in South Korea, the United Arab Emirates and Uruguay, and has traveled to over 70 countries. He's an alum of the University of Maryland, Baltimore County and the University of Southern California.