Hannon Armstrong Sustainable Infrastructure Capital : Fourth Quarter 2020 Earnings Presentation

EARNINGS PRESENTATION

Fourth Quarter and Full Year 2020

FORWARD LOOKING STATEMENTS

Some of the information contained herein are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. When used herein, words such as "believe," "expect," "anticipate," "estimate," "plan," "continue," "intend," "should," "may," "target," or similar expressions, are intended to identify such forward-looking statements. Forward-looking statements are subject to significant risks and uncertainties. Investors are cautioned against placing undue reliance on such statements. Actual results may differ materially from those set forth in the forward-looking statements. Factors that could cause actual results to differ materially from those described in the forward-looking statements include those discussed under the caption "Risk Factors" included in our Form 10-K for the year ended December 31, 2020 (the "Form 10-K"), which will be filed with the U.S. Securities and Exchange Commission (SEC), as well as in other reports that we file with the SEC.

One of the most significant factor is the ongoing impact of the current outbreak of the novel coronavirus (COVID-19), on the U.S., regional and global economies, the U.S. sustainable infrastructure market and the broader financial markets. The current outbreak of COVID-19 has also impacted, and is likely to continue to impact, directly or indirectly, many of the other important factors below and the risks described in the Form 10-K and in our subsequent filings under the Securities Exchange Act of 1934, as amended. Other factors besides those listed could also adversely affect us. Any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. In particular, it is difficult to fully assess the impact of COVID-19 at this time due to, among other factors, uncertainty regarding the severity and duration of the outbreak domestically and internationally, uncertainty regarding the effectiveness of federal, state and local governments' efforts to contain the spread of COVID-19 and respond to its direct and indirect impact on the U.S. economy and economic activity.

Forward-looking statements are based on beliefs, assumptions and expectations as of December 31, 2020. This guidance reflects the Company's estimates of (i) yield on its existing Portfolio; (ii) yield on incremental Portfolio investments, inclusive of the Company's existing pipeline; (iii) the volume and profitability of securitization transactions; (iv) amount, timing, and costs of debt and equity capital to fund new investments; (v) changes in costs and expenses reflective of the Company's forecasted operations, (vi) the ongoing impact of the current outbreak of the COVID-19 and (vii) the general interest rate and market environment. All guidance is based on current expectations of the future impact of COVID-19 and the economic conditions, the regulatory environment, the dynamics of the markets in which we operate and the judgment of the Company's management team. The Company has not provided GAAP guidance as discussed in the Supplemental Financial Data slide of this presentation. We disclaim any obligation to publicly release the results of any revisions to these forward-looking statements reflecting new estimates, events or circumstances after the date of this presentation.

This presentation refers to certain financial measures that were not prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). Reconciliations of those non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in the Appendix herein.

Estimated carbon savings are calculated using the estimated kilowatt hours, gallons of fuel oil, million British thermal units of natural gas and gallons of water saved as appropriate, for each project. The energy savings are converted into an estimate of metric tons of CO2 equivalent emissions based upon the project's location and the corresponding emissions factor data from the U.S. Government and International Energy Agency. Portfolios of projects are represented on an aggregate basis. The carbon and water savings information included in this presentation is based on data from a third-party source that we believe to be reliable. We have not independently verified such data, which involves risks and uncertainties and is subject to change based on various factors.

Past performance is not indicative nor a guarantee of future returns.

RECENT HIGHLIGHTS

Key Performance Indicators	FY20	FY19
EPS	GAAP	$1.10	$1.24
Distributable1	$1.55	$1.40
NII	GAAP-based	$29m	$38m
Distributable1	$88m	$82m
Portfolio Yield1	7.6%	7.6%
Balance Sheet Portfolio	$2.9b	$2.1b
Managed Assets1	$7.2b	$6.2b
Debt to Equity Ratio	1.8x	1.5x
Distributable ROE2	10.7%	10.5%
Transactions Closed	$1.9b	$1.3b
CarbonCount®3	1.03	0.30
Incremental Annual Reduction in Carbon Emissions	~2.0m MT	~385k MT
WaterCountTM 4	303	293
Incremental Annual Water Savings	~576MG	~381 MG

Financial Results1

• • Delivered GAAP EPS of $1.10 and grew Distributable (formerly, Core Pre-CECL) EPS to $1.55 - an increase of 11% YOY and a 7% 3-yr CAGR (exceeding previous guidance range)

• • Grew Portfolio 38% YOY to $2.9b

• • Closed $1.9b of transactions in FY20 - a 48% YOY increase

• • Increased dividend to $0.35 per share for 1Q21

New Guidance

• • Expect that annual Distributable Earnings per Share will grow at a compounded annual rate of 7% to 10% from 2021 to 2023, relative to the 2020 baseline of $1.55 per share, which is equivalent to a 2023 midpoint of $1.98 per share

• 1) See Appendix for an explanation of Distributable Earnings, Distributable Net Investment Income, Portfolio Yield, and Managed Assets, including reconciliations to the relevant GAAP measures, where applicable.

• 2) Distributable ROE is calculated using Distributable Earnings for the period and the average of the ending quarterly equity balances in 2020 and 2019.

• 3) CarbonCount® is a scoring tool that evaluates investments in U.S.-based energy efficiency and renewable energy projects to estimate the expected CO2 emission reduction per $1,000 of investment.

• 4) WaterCountTM is a scoring tool that evaluates investments in U.S.-based projects to estimate the expected water consumption reduction per $1,000 of investment.

NEW GUIDANCE1

Distributable Earnings per Share

Dividends per Share

$2.00

$1.80

$1.60

$1.40

$1.20

2017

$2.00

$1.80

2018

2019

2020

2021

2022

2023

$1.60

$1.40

$1.20

2017

2018

Expected Annual Growth (2021 - 2023)

Distributable EPS: 7% - 10%

DPS: 3% - 5%

1) See appendix for an explanation of Distributable Earnings, including a reconciliation to the relevant GAAP measure.

2019

2020

2021

2022

2023

MACRO TRENDS

Climate Change AcceleratesClean Energy Proves Resilient

Climate Solutions Market Is Growing

123

4

Thirst for Credible ESG Equities

5

Policy as a Tailwind

• 1) NASA's Goddard Institute for Space Studies (2021)

• 2) Weather, Climate & Catastrophe Insight: 2020 Annual Report (Aon)

• • 2020 tied for warmest year on record1

• • In 2020, there were 416 natural disasters across the globe, resulting in economic losses of >$250b - an 8% increase compared to the century average2

• • Despite global pandemic and economic recession, our portfolio of long duration, noncyclical assets with climate benefits performed as expected

• • Deep relationships with large, ambitious clients along with flexible, permanent capital solutions have led to a greater volume of investment opportunities

• • Institutional investor mandates coupled with the strong performance of ESG leaders continue to drive capital to ESG equities

• • Need remains for global standardized reporting to prevent greenwashing

• • Strong start by the Biden Administration with executive orders to address climate change

• • Momentum grows for a price on carbon by way of a carbon dividend plan

PIPELINE GROWS

Markets

Grid-Connected

SustainableInfrastructure

Behind-the-MeterSolar (residential, C&I, community) remains strong with increasing storage attachment

Federal EE poised for growth

Growth driven by deep client relationships

Well-balanced between onshore wind, GC solar, and solar land

Smaller transactions across multiple niche asset classes driven in part by climate change impacts

Deep client relationships coupled with a growing opportunity set have driven growth in our pipeline, which now stands at >$3b

As of 12/31/2020; markets include Behind-the-Meter (BTM), Grid-Connected (GC), and Sustainable Infrastructure (SI)

INVESTMENT SPOTLIGHT: CLEARWAY GC PORTFOLIO

Investment Overview

• • $663m preferred equity investment with Clearway Energy, Inc. (CWEN) as equity co-investor

  • • $200m initial investment with subsequent fundings as projects achieve commercial operations

• • 2.0 GW grid-connected wind, solar, and solar + storage projects

• • ~90% of generation is contracted

  • • Predominantly IG corporate, utility, university, and municipal offtakers (including Toyota, Cisco, Lowe's, AEP, and Brown University)

• • O&M Provider: Clearway Energy Group

• • CarbonCount : 1.06

®

Strategic Highlights

• • First GC solar + storage investment

•

Significantly grows portfolio and supports continued growth in recurring NII

•

Continued programmatic deal flow with large, ambitious partner focused on U.S. market

Key Metrics1

>14 years

IG

WAVG Offtaker

WAVG Contract Life

Credit Rating

CarbonCount®

Weighted average ("WAVG")

Portfolio Technology

(nameplate capacity)

INVESTMENT SPOTLIGHT: ENGIE BTM PORTFOLIO

Investment Overview

• • $93m preferred equity investment with Morgan Stanley as tax equity and ENGIE as sponsor equity co-investors

  • • $37m funded by EOY20 with subsequent fundings at predetermined completion milestones

• • 70 MW community and C&I solar + 8 MW collocated storage projects located across multiple states

  • • Contracted with highly creditworthy consumer, C&I, and co-operative offtakers

• • O&M Provider: ENGIE

  ®

• • CarbonCount : 0.27

Strategic Highlights

• • Unique structure leveraging tax equity financing to bring efficiency to a forward flow of projects

•

Significantly grows community and C&I solar portfolios

Key Metrics

24 years

IG

WAVG Offtaker

WAVG Contract Life

Credit Rating

CarbonCount®

GROWTH DRIVEN BY PORTFOLIO GROWTH

Disclosed Investments Announced and To Be Funded1

Announced	Funded (EOY20)	Fully Funded (Expectation)
ENGIE GC	$540m	$465m	1H21
ENGIE BTM	$93m	$37m	EOY21
Clearway GC	$663m	$200m	EOY22
Total	$1,296m	$702m
Announced But Unfunded (EOY20) 2	$595m

$inbillions

Full funding of announced transactions will significantly contribute to portfolio growth and profitability over next few years

• 1) Subtotals may not sum due to rounding.

• 2) As of 12/31/20

• 3) Balance Sheet Portfolio

Portfolio3

$3

$2

$1

$0

2016

2017

2018

2019

2020

PORTFOLIO GROWS AND FURTHER DIVERSIFIES

Markets

Behind-the-Meter

Yield: 8.2%

Grid-Connected

Yield: 7.1%

Sustainable Infrastructure3

Yield: 7.4%

Community

Solar

SI

EOY20	EOY19
Portfolio Size Yield	$2.9b 7.6%	$2.1b 7.6%
Onshore Wind	28%	17%
Resi Solar	24%	30%
Solar Land	17%	22%
Public Sector	14%	15%
GC Solar	5%	0%
C&I	5%	7%
Green Real Estate	3%	6%
Community Solar	3%	2%
Sustainable Infrastructure	1%	1%

Diversified and Long-Dated Cashflows2
>230 / >180	$12m / $11m	17 yrs /15 yrs
Total Investments4	Average Investment	WAVG Life

(EOY20 / EOY19)

1)	Includes Freddie Mac and C-PACE investments
10	2)	Balance Sheet Portfolio, as of 12/31/2020
3)	Includes all other asset classes that are not specifically designated as BTM or GC
4)	Individual investments with outstanding balances > $1m

STRONG PORTFOLIO WITH POSITIVE CREDIT ATTRIBUTES

Recent Portfolio Performance

Positive Credit Attributes

Rating	Description	Performance Metric
1	Performing1	99%
2	Slightly below metrics2	1%
3	Significantly below metrics3	~0%

Outstanding Credit History

De minimis (~20 bps) cumulative credit losses since 2013

Portfolio (%)	Structural Seniority	Obligor Credit
Onshore Wind	28%	Preferred	Typically IG corporates or utilities
Residential Solar	24%	Preferred	>166k consumers WAVG FICO: "Very Good"4
Solar Land	17%	Super Senior	Typically IG corporates
Public Sector	14%	Senior	Predominantly IG govt or quasi-govt entities
GC Solar	5%	Preferred	Typically IG corporates or utilities
C&I	5%	Senior or Preferred	Typically IG corporates
Green Real Estate	3%	Super Senior or Subordinated Debt	Real-estate secured
Community Solar	3%	Typically Preferred	Typically IG corporates and/or creditworthy consumers
Sustainable Infrastructure	1%	Senior	Predominantly IG govt entities

1)	This category includes our assets where based on our credit criteria and performance to date we believe that our risk of not receiving our invested capital remains low.
2)	This category includes our assets where based on our credit criteria and performance to date we believe there is a moderate level of risk to not receiving some or all of our invested capital.
11	3)	This category includes our assets where based on our credit criteria and performance to date, we believe there is substantial doubt regarding our ability to recover some or all of our invested capital. Included in this category are two commercial
receivables with a combined total carrying value of approximately $8 million as of December 31, 2020 which we consider impaired and have held on non-accrual status since 2017. We recorded an allowance for the entire asset amounts as described
in our 2020 Form 10-K. We expect to continue to pursue our legal claims with regards to these assets.
4)	Across 21 states and the District of Columbia; qualitative FICO Rating corresponds to average FICO Score range for consumer obligors (as of lease origination dates).

FINANCIAL RESULTS - 4Q20 AND FY20

Results, Unaudited1 ($ in millions, except per share figures)	4Q20	4Q19	FY20	FY19	FY20 Commentary
GAAP Earnings	$24.9	$46.1	$82.4	$81.6	Higher interest and gain on sale revenue offset by higher interest expense from additional green bond issuances
GAAP Diluted EPS	$0.32	$0.66	$1.10	$1.24
Distributable Earnings	$29.3	$26.8	$117.5	$92.7
Distributable EPS	$0.37	$0.40	$1.55	$1.40
GAAP-based Net Investment Income2	$4.7	$11.0	$29.3	$37.8
Distributable Earnings from Equity Method Investments3	14.9	12.6	55.3	41.4
Distributable Adjustment for Intangible Amortization	0.8	0.8	3.1	3.1
Distributable Net Investment Income	$20.4	$24.4	$87.7	$82.3	Growth of 7% YOY despite negative carry for much of 2020
GAAP Gain on Sale and Fees	$17.9	$9.9	$65.5	$39.5	Strong access to private market in 2020

Primary Non-GAAP Earnings Metric	CECL Impact4
Prior to 2020	Core Earnings	Prior to adoption of CECL
1Q20 - 3Q20	Core Earnings (Pre-CECL)	Excludes impact of most CECL provisions
4Q20 onward	Distributable Earnings	Excludes impact of most CECL provisions

Equity Method Summary1,3	FY20	FY19
GAAP Earnings	$48	$64
Distributable Earnings Adjustment	7	(23)
Distributable Earnings	$55	$41
Return of Investment	102	60
HASI Cash Collected	$157	$101

1)	See Appendix for an explanation of Distributable Earnings and Distributable Net Investment Income, including reconciliations to the relevant GAAP measures, where applicable.
12	2)	GAAP-based Net Investment Income includes Interest Income and Rental Income, less Interest Expense as reported within our financial statements prepared in accordance with US GAAP
3)	Represents Distributable Earnings from our Equity Method Investments when allocating cash distributions between a return on and return of invested capital. Refer to the Appendix for additional discussion
4)	Credit loss standard (Current Expected Credit Losses or "CECL" or Topic 326) adopted in 2020

GROWTH HIGHLIGHTS

Managed Assets1

Off Balance SheetBalance Sheet Portfolio

Distributable NII1

$8 $6

CAGR: 17%

$100

CAGR: 165%

$7.2

$inbillions

$4

$2 $0

2016

$80

$inmillions

$60

$40

$20

$0

2017

2018

2019

2020

2016

2017

2018

Portfolio Yield1 and Distributable ROE2

Portfolio YieldDistributable ROE

Transaction Volumes

$2.0

5yr Avg: $1.3b

15%

10%

5%

0%

10.1% 10.2%

2017

11.1%

10.5% 10.7%

$inbillions

$1.5

$1.0

$0.5

$0.0

2016

2018

2019

2020

2016

2017

2018

• 1) See Appendix for an explanation of Distributable Net Investment Income, Managed Assets, and Portfolio Yield, including reconciliations to the relevant GAAP measures, where applicable.

• 2) Distributable ROE is calculated using Distributable Earnings for the period and the average of the quarterly ending equity balances.

$88

$82

2019

2020

$1.9

2019

2020

BALANCE SHEET UPDATE

Strengthened Long-Term Position

• • Grew Portfolio 30% QOQ through deployment of $739m to fund new assets

Line Item	($ in millions)1
Beginning Portfolio (9/30/20)	$2,230
Funding of this quarter's originations	364
Funding of prior originations	375
Principal collections	(61)
Syndications and Securitizations2	(16)
Other	16
Ending Portfolio (12/31/20)	$2,908

• 1) Subtotals may not sum due to rounding.

• 2) Includes only securitizations of assets on the balance sheet as of the end of the previous quarter (9/30/20)

Assets	12/31/20 ($ in millions)1
Cash	$286
Equity method investments	1,280
Government receivables	248
Commercial receivables	965
Real estate	359
Investments	55
Securitization assets	164
Other	102
Total Assets	$3,459
Liabilities and Equity
Credit facility	$23
Non-recourse debt	593
Convertible notes	291
Senior unsecured notes	1,283
Other	59
Total Liabilities	$2,249
Total Equity	$1,210
Total Liabilities and Equity	$3,459

DURABLE CAPITAL STRUCTURE

Demonstrated access to diversified funding sources and a migration toward corporate unsecured debt

• • Raised >$1.2b in debt and equity in 2020 including:

  • • $775m in unsecured green bonds

  • • $144m in convertible green bonds

  • • $298m in equity

• • Established $50m sustainability-linked unsecured revolving credit facility with J.P. Morgan in 1Q21

Conservative leverage profile

• • 1.8x debt to equity1

• • Rating of BB+ by S&P and Fitch reaffirmed in 3Q20

Minimal refinance and interest rate risk

• • 99% of debt is fixed rate

• • Laddered recourse debt maturities with no material maturity until 3Q222

• • Nonrecourse debt largely amortizes within contracted term of assets

• 1) Below previously communicated target of less than 2.5x

  Capital Raised ($m)

  $1,800

  $1,200

  $600

  $0

  2013 2014 2015 2016 2017 2018 2019 2020

  Secured DebtCorporate Unsecured Debt

  Recourse Debt Maturities ($m)

  $800 $600 $400 $200

  $0

  2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

  Credit FacilityConvertible NotesSenior Unsecured Notes

• 2) Our convertible notes, which mature in 2022 and 2023, may be settled in shares, so this does not necessarily reflect a cash need.

Public Equity

ESG ACCOMPLISHMENTS

Environmental

• • Recorded highest annual CarbonCount in company history

• • Invested $1.9b in climate solutions

• • Issued >$900m in green bonds

• • Joined Partnership for Carbon Accounting Financials (PCAF)

• • Signed UN-supported Principles for Responsible Investment

• • Joined Nasdaq Sustainable Bond Network

Social

• • Declared Social Dividend1 of $1m in 1Q21 to capitalize newly launched Hannon Armstrong Foundation

• • Significant corporate donations to organizations providing COVID relief, addressing racial injustice, and supporting voting rights

• • Launched multiple DEIJ initiatives for multi-year implementation

• • Joined multiple initiatives to promote free and fair elections (Civic Alliance 100, Time to Vote, Business for America's Operation Vote Safe)

Governance

• • Expanded Board with appointments of Clay Armbrister and Nancy Floyd

•

To be further detailed in our 2021 proxy statement

•

Internal management realignment enhanced DEIJ in the C-suite Expanded DEIJ disclosures in 10-K

•

Joined CEO Action for Diversity & Inclusion

COMPELLING VALUE PROPOSITION

Programmatic Growth

• • Robust >$3b pipeline supported by deep relationships with leading clean energy and infrastructure companies

Diversified High-Quality Portfolio

• • >230 investments across ~10 asset classes

Durable Capital Structure

• • Over $9b raised from a diverse array of funding sources

• • Credit rating of BB+ underpinned by prudent 1.8x debt to equity ratio and 99% fixed debt

Industry-Leading ESG

• • Leading investor in climate solutions with proprietary tools to evaluate portfolio carbon and water reduction impacts

Proven Track Record

• • Outstanding credit history with de minimis ~20 bps cumulative credit losses

•

Stable and growing dividend

Key Metrics3
3% - 5%	7% - 10%	>$7b
DPS	Distributable EPS	Managed Assets
3yr Compound Growth Guidance	3yr Compound Growth Guidance

• 1) As of 12/31/20

• 2) Global X YieldCo & Renewable Energy Index

  Total Return1

  1yr	3yr	5yr
  HASI	105%	46%	35%
  S&P 500 ESG Index	20%	14%	14%
  FTSE NAREIT Index	(5)%	5%	7%
  YieldCo Index2	27%	18%	16%

• 3) See Appendix for an explanation of Distributable Earnings and Managed Assets, including reconciliations to the relevant GAAP measures, where applicable.

APPENDIX

Explanatory Notes

Distributable Earnings and Earnings on Equity Method Investments

We are changing the name of our primary Non-GAAP earnings metric from core (Pre-CECL) earnings to Distributable Earnings with no change in the historical method of calculation. We will no longer be reporting a core earnings metric which includes the CECL provision.

We calculate Distributable Earnings as GAAP net income (loss) excluding non-cash equity compensation expense, provisions for loss on receivables, amortization of intangibles, any one-time acquisition related costs or non-cash tax charges and the earnings attributable to our non-controlling interest of our Operating Partnership. We also make an adjustment to our equity method investments in the renewable energy projects as described below. Judgment will be utilized in determining when we will reflect the losses on receivables in our Distributable Earnings. In making this determination, we will consider certain circumstances such as, the time period in default, sufficiency of collateral as well as the outcomes of any related litigation. In the future, distributable earnings may also exclude one-time events pursuant to changes in GAAP and certain other non-cash charges as approved by a majority of our independent directors.

Certain of our equity method investments in renewable energy and energy efficiency projects are structured using typical partnership "flip" structures where the investors with cash distribution preferences receive a pre- negotiated return consisting of priority distributions from the project cash flows, in many cases, along with tax attributes. Once this preferred return is achieved, the partnership "flips" and the common equity investor, often the operator or sponsor of the project, receives more of the cash flows through its equity interests while the previously preferred investors retain an ongoing residual interest. We have made investments in both the preferred and common equity of these structures. Regardless of the nature of our equity interest, we typically negotiate the purchase prices of our equity investments, which have a finite expected life, based on our assessment of the expected cash flows we will receive from these projects discounted back to the net present value, based on a target investment rate, with the expected cash flows to be received in the future reflecting both a return on the capital (at the investment rate) and a return of the capital we have committed to the project. We use a similar approach in the underwriting of our receivables.

Under GAAP, we account for these equity method investments utilizing the HLBV method. Under this method, we recognize income or loss based on the change in the amount each partner would receive, typically based on the negotiated profit and loss allocation, if the assets were liquidated at book value, after adjusting for any distributions or contributions made during such quarter. The HLBV allocations of income or loss may be impacted by the receipt of tax attributes, as tax equity investors are allocated losses in proportion to the tax benefits received, while the sponsors of the project are allocated gains of a similar amount. In addition, the agreed upon allocations of the project's cash flows may differ materially from the profit and loss allocation used for the HLBV calculations.

The cash distributions for those equity method investments where we apply HLBV are segregated into a return on and return of capital on our cash flow statement based on the cumulative income (loss) that has been allocated using the HLBV method. However, as a result of the application of the HLBV method, including the impact of tax allocations, the high levels of depreciation and other non-cash expenses that are common to renewable energy projects and the differences between the agreed upon profit and loss and the cash flow allocations, the distributions and thus the economic returns (i.e. return on capital) achieved from the investment are often significantly different from the income or loss that is allocated to us under the HLBV method. Thus, in calculating Distributable Earnings, for certain of these investments where there are characteristics as described above, we further adjust GAAP net income (loss) to take into account our calculation of the return on capital (based upon the investment rate) from our renewable energy equity method investments, as adjusted to reflect the performance of the project and the cash distributed. We believe this equity method investment adjustment to our GAAP net income (loss) in calculating our Distributable Earnings measure is an important supplement to the HLBV income allocations determined under GAAP for an investor to understand the economic performance of these investments where HLBV income can differ substantially from the economic returns.

We believe a non-GAAP measure, such as Distributable Earnings, that adjusts for the items discussed above is and has been a meaningful indicator of our economic performance and is useful to our investors as well as management in evaluating our performance as it relates to expected dividend payments over time. As a REIT, we are required to distribute substantially all of our taxable income to investors in the form of dividends and we believe our dividends are a principal focus of our investors. Additionally, we believe that our investors also use Distributable Earnings, or a comparable supplemental performance measure, to evaluate and compare our performance to that of our peers, and as such, we believe that the disclosure of Distributable Earnings is useful to our investors.

However, Distributable Earnings does not represent cash generated from operating activities in accordance with GAAP and should not be considered as an alternative to net income (determined in accordance with GAAP), or an indication of our cash flow from operating activities (determined in accordance with GAAP), or a measure of our liquidity, or an indication of funds available to fund our cash needs, including our ability to make cash distributions. In addition, our methodology for calculating Distributable Earnings may differ from the methodologies employed by other companies to calculate the same or similar supplemental performance measures, and accordingly, our reported Distributable Earnings may not be comparable to similar metrics reported by other companies.

Explanatory Notes

Managed Assets

As we both consolidate assets on our balance sheet and securitize assets off-balance sheet, certain of our receivables and other assets are not reflected on our balance sheet where we may have a residual interest in the performance of the investment, such as servicing rights or a retained interest in cash flows. Thus, we present our investments on a non-GAAP "Managed Assets" basis, which assumes that securitized receivables are not sold. We believe that our Managed Asset information is useful to investors because it portrays the amount of both on- and off-balance sheet receivables that we manage, which enables investors to understand and evaluate the credit performance associated with our portfolio of receivables, investments and residual assets in off-balance sheet securitized receivables. Our non-GAAP Managed Assets measure may not be comparable to similarly titled measures used by other companies.

Distributable Net Investment Income

Distributable Net Investment Income is calculated as GAAP-based Net Investment Income (Interest Income and Rental Income less Interest Expense) as reported within our financial statements prepared in accordance with US GAAP plus Distributable Earnings from our Equity Method Investments when allocating cash distributions between a return on and return of invested capital plus amortization of real estate intangibles. We utilize this measure in operating our business and believe it is useful information for our investors for the reasons discussed in our core earnings measure.

Portfolio Yield

We calculate portfolio yield as the weighted average underwritten yield of the investments in our Portfolio as of the end of the period. Underwritten yield is the rate at which we discount the expected cash flows from the assets in our portfolio to determine our purchase price. In calculating underwritten yield, we make certain assumptions, including the timing and amounts of cash flows generated by our investments, which may differ from actual results, and may update this yield to reflect our most current estimates of project performance. We believe that portfolio yield provides an additional metric to understand certain characteristics of our Portfolio as of a point in time. Our management uses portfolio yield this way and we believe that our investors use it in a similar fashion to evaluate certain characteristics of our portfolio compared to our peers, and as such, we believe that the disclosure of portfolio yield is useful to our investors.

Guidance

The Company expects that annual Distributable Earnings per share will grow at a compounded annual rate of 7% to 10% from 2021 to 2023, relative to the 2020 baseline of $1.55 per share, which is equivalent to a 2023 midpoint of $1.98 per share. The Company also expects that annual dividends per share will grow at a compound annual rate of 3% to 5% from 2021 to 2023, relative to the 2020 baseline of $1.36 per share, which is equivalent to a 2023 midpoint of $1.53 per share. This guidance reflects the Company's judgments and estimates of (i) yield on its existing Portfolio; (ii) yield on incremental Portfolio investments, inclusive of the Company's existing pipeline; (iii) the volume and profitability of securitization transactions; (iv) amount, timing, and costs of debt and equity capital to fund new investments; (v) changes in costs and expenses reflective of the Company's forecasted operations, (vi) the ongoing impact of COVID-19 and the speed and efficacy of vaccine distribution on economic conditions and (vii) the general interest rate and market environment. All guidance is based on current expectations of the ongoing and future impact of COVID-19 and the speed and efficacy of vaccine distribution on economic conditions, the regulatory environment, the dynamics of the markets in which we operate and the judgment of the Company's management team. The Company has not provided GAAP guidance as discussed in the Forward-Looking Statements section of this press release.

INCOME STATEMENT

BALANCE SHEET

RECONCILIATION OF GAAP NET INCOME TO DISTRIBUTABLE EARNINGS

RECONCILIATION OF GAAP NET INCOME TO DISTRIBUTABLE EARNINGS

RECONCILIATION OF GAAP-BASED NII TO DISTRIBUTABLE NII

Securities are offered by Hannon Armstrong Securities, LLC, a registered broker dealer, member FINRA and SIPC and subsidiary of Hannon Armstrong Sustainable Infrastructure Capital, Inc.

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