What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-21 compared with 2022-02-22 · 241 added, 176 removed, 1009 unchanged (29% of the section changed)

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We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 21, 2023 expressed an unqualified opinion thereon.

Adoption of ASU 2016-13

As discussed in Note 2 to the consolidated financial statements, the Company changed its method of

accounting for credit losses in 2020 due to the adoption of Accounting Standards Update (ASU) No.

2016-13 , Financial Instruments — Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments , and the related amendments.

Basis for Opinion

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The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

Accounting for Equity Investments in Renewable Energy and Energy Efficiency Projects

Description of the Matter As discussed in Note 2 to the consolidated financial statements, the Company makes equity investments in renewable energy and energy efficiency projects that are accounted for under the equity method of accounting.

During the year ended December 31, 2021, the Company made new equity investments in renewable energy and energy efficiency projects amounting to $401.9 million and held $1.8 billion of equity investments in renewable energy and energy efficiency projects as of December 31, 2021.

Accounting for Equity Investments in Climate Solutions Projects

Description of the Matter As discussed in Note 2 to the consolidated financial statements, the Company makes equity investments in climate solutions projects that are accounted for under the equity method of accounting.

During the year ended December 31, 2022, the Company made new equity investments in climate solutions projects amounting to $128 million and held $1.9 billion of equity investments in climate solutions projects as of December 31, 2022.

The Company’s determination that it does not have the power to direct the significant activities impacting each of the investees’ economic performance (“power”) is critical to its determination that it is not the primary beneficiary of the investee.

Also, as described in Note 2 to the consolidated financial statements, for equity method investments that contain preferences with regard to cash flows from operations, capital events and liquidation in their respective limited liability company agreements (“LLC Agreements”), the Company applies the Hypothetical Liquidation at Book Value (“HLBV”) method to record its share of profits and losses on these investments, which is done one quarter in arrears to allow for receipt of financial information from its investees.

Auditing the Company’s determination of whether it has power was complex and required significant judgment to determine both the activities of the investee that most significantly impact the investee’s economics, and the distribution of the power among the members of the investee that ultimately determine the outcome of such activities.

Also as described in Note 2, the Company evaluates their equity method investments quarterly for other than temporary impairment (“OTTI”).

This requires evaluating both qualitative and quantitative evidence to determine whether there may be indicators of a loss in investment value below carrying value.

Auditing the Company’s determination of whether it has power over an investee was complex and required significant judgment to determine both the activities of the investee that most significantly impact the investee’s economics, and the distribution of power among the members of the investee that ultimately determine the outcome of such activities.

In addition, auditing the Company’s application of the HLBV method was challenging and inherently complex, because the application is based on its interpretations of the liquidation provisions outlined within investees’ LLC Agreements.

Lastly, evaluating available qualitative and quantitative evidence was subjective and required judgment as to whether there were indicators of a loss in investment value below carrying value.

How We Addressed the Matter in our Audit We tested controls that address the risks of material misstatement relating to:

i) the determination of whether the Company has the power to direct the significant activities of the investees and ii) the recognition of its share of investees’ profits and losses through use of the HLBV method based on financial information reported to the Company from its investees.

i) the determination of whether the Company has the power to direct the significant activities of the investees, ii) the recognition of its share of investees’ profits and losses through use of the HLBV method based on financial information reported to the Company from its investees, and iii) the review of available qualitative and quantitative evidence in determining whether there may be indicators of a loss in investment value below carrying value.

For example, we tested controls over management’s review of the variable interest model and determination of whether the Company has power.

We also tested controls over management’s review of the HLBV method, including the application of the liquidation provisions and the financial information reported from their investees.

Lastly, we tested controls over management’s review of quantitative and qualitative evidence and whether there were indicators of a loss in investment value below carrying value.

To evaluate whether the Company has power over each investee, our audit procedures included, among others, inspecting LLC Agreements and evaluating management’s analysis of the significant activities of the investee and which parties can direct those significant activities.

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We also performed additional procedures on the Company’s HLBV calculations that included, but were not limited to, recalculating the stated preferred returns, recalculating allocations of tax attributes, comparing inputs included within the calculations to the information reported to the Company by its investee, and recalculating the Company’s share of profits and losses of the investee.

We reviewed the Company’s evaluation of qualitative and quantitative evidence and whether there may be indicators of a loss in investment value below carrying value for a sample of investments.

This included, among others, evaluating management’s identification of indicators that the Company’s investments may have experienced a loss of value below carrying value, agreeing certain qualitative and quantitative information used in the assessment to source documents, testing clerical accuracy of the analysis as applicable, and assessing any contradictory evidence that arose during our audit.

/s/ Ernst & Young LLP

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Receivables held-for-sale

85,254 22,214

Real estate 353,000 356,088

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Commercial paper notes 192 50,094

Term loan facility 379,742 —

Non-recourse debt (secured by assets of $ 632 million and $ 573 million, respectively)

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Non-controlling interest

35,509 21,797

Total Stockholders’ Equity 1,664,746 1,566,515

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Net income (loss) — — — 82,416 — 343 82,759

Adoption of ASU 2016-13, net of tax effect ( 14,031 ) ( 74 ) ( 14,105 )

Unrealized gain (loss) on available-for-sale securities

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Other 59 — 913 — — ( 859 ) 54

Tax basis difference on contributed asset

— — ( 4,549 ) — — — ( 4,549 )

Dividends and distributions

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Net income (loss) — — — 126,579 — 767 127,346

Adoption of ASU 2016-13, net of tax effect — — — ( 14,031 ) — ( 74 ) ( 14,105 )

Unrealized gain (loss) on available-for-sale securities — — — — ( 5,401 ) ( 33 ) ( 5,434 )

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Issuance (repurchase) of vested equity-based compensation shares 103 1 ( 3,213 ) — — — ( 3,212 )

Redemption of OP Units 3 — 85 — — ( 85 ) —

Conversion of convertible notes 283 3 7,671 — — — 7,674

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Proceeds from sales of receivables 5,047 75,582 59,398

Purchases of real estate ( 4,550 ) — —

Sales of real estate 4,550 — —

Purchases of investments ( 2,329 ) ( 4,830 ) ( 40,185 )

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Proceeds from issuance of commercial paper notes — 50,000 —

Principal payments on commercial paper notes ( 50,000 ) — —

Proceeds from issuance of non-recourse debt 32,923 — 15,938

Principal payments on non-recourse debt ( 30,581 ) ( 37,974 ) ( 125,969 )

Proceeds from issuance of term loan 383,000 — —

Proceeds from issuance of senior unsecured notes — 1,000,000 771,250

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Proceeds from issuance of convertible notes 200,000 — 143,750

Payments on deferred funding obligations — — ( 18,791 )

Principal payments on convertible notes ( 461 ) — —

Net proceeds of common stock issuances 188,881 200,641 298,070

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We also generate on-going fees through off-balance sheet securitization transactions, advisory services and asset management.

We refer to the income producing assets that we hold on our balance sheet as our “Portfolio.” Our Portfolio may include:

We refer to the income producing assets that we hold on our balance sheet as our “Portfolio.” Our Portfolio includes:

• equity investments in either preferred or common structures in unconsolidated entities which own renewable energy or energy efficiency projects;

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• investments in debt securities of renewable energy or energy efficiency projects.

We finance our business through cash on hand, borrowings through short-term commercial paper issuances and revolving credit facilities, issuances of unsecured debt, asset-backed securitization transactions and equity issuances.

We finance our business through cash on hand, short-term commercial paper issuances, revolving credit facilities, issuances of unsecured debt, asset-backed securitization transactions, convertible securities, and equity issuances.

We also generate fee income through securitizations and syndications, by providing broker/dealer services and by managing and servicing assets owned by third parties.

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Consolidation

We account for our investments in entities that are considered voting interest entities or variable interest entities (“VIEs”) under ASC 810 and assess whether we should consolidate these entities on an ongoing basis.

We account for our investments in entities that are considered voting interest entities or variable interest entities (“VIEs”) under ASC 810 and assess on an ongoing basis whether we should consolidate these entities.

We have established various special purpose entities or securitization trusts for the purpose of securitizing certain assets that are not consolidated in our financial statements as described below in Securitization of Financial Assets.

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Certain of our equity method investments were determined to be interests in VIEs in which we are not the primary beneficiary, as we do not direct the significant activities of these entities, and thus we account for those investments as Equity Method Investments as discussed below.

Our maximum exposure to loss through these investments is limited to their recorded values.

Our maximum exposure to loss through these investments is typically limited to their recorded values.

However, we may provide financial commitments to these VIEs or guarantees of certain of their obligations.

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Equity Method Investments

We have made equity investments in various renewable energy and energy efficiency projects.

We have made equity investments in various climate solutions projects, typically in structures where we have a preferred return position.

These investments are typically owned in holding companies (using limited liability companies (“LLCs”) taxed as partnerships) where we partner with either the operator of the project or other institutional investors.

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Investors, if any, in a preferred return position typically receive a priority distribution of all or a portion of the project’s cash flows, and in some cases, tax attributes.

Once the preferred return, if applicable, is achieved, the partnership “flips” and the operator of the project along with any other common equity investors receive a larger portion of the cash flows, with the previously preferred investors retaining an on-going residual interest.

Our equity investments in renewable energy or energy efficiency projects are accounted for under the equity method of accounting.

Once the preferred return, if applicable, is achieved, the partnership “flips” and common equity investors, often the operator of the project, receive a larger portion of the cash flows, with the previously preferred investors retaining an on-going residual interest.

Our equity investments in climate solutions projects are accounted for under the equity method of accounting.

Under the equity method of accounting, the carrying value of these equity method investments is determined based on amounts we invested, adjusted for the equity in earnings or losses of the investee allocated based on the LLC agreement, less distributions received.

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This method is referred to as the hypothetical liquidation at book value method (“HLBV”).

Our exposure to loss to these investments is limited to the amount of our equity investment, as well as other investments we may have in the same investee.

Any difference between the amount of our investment and the amount of underlying equity in net assets is generally amortized over the life of the assets and liabilities to which the difference relates.

Our exposure to loss in these investments is limited to the amount of our equity investment, as well as receivables from or guarantees made to the same investee.

Any difference between the amount of our investment and the amount of underlying equity in net assets at the time of our investment is generally amortized over the life of the assets and liabilities to which the difference relates.

Cash distributions received from each equity method investment are classified as operating activities to the extent of cumulative earnings for each investment in our consolidated statements of cash flows.

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We typically recognize earnings one quarter in arrears for certain of these investments to allow for the receipt of financial information.

We evaluate on a quarterly basis whether our investments accounted for using the equity method have an other than temporary impairment (“OTTI”).

An OTTI occurs when the estimated fair value of an investment is below the carrying value and the difference is determined to not be recoverable.

We evaluate on a quarterly basis whether the current carrying value of our investments accounted for using the equity method have an other than temporary impairment (“OTTI”).

An OTTI occurs when the estimated fair value of an investment is below the carrying value and the difference is determined to not be recoverable in the near term.

First, we consider both qualitative and quantitative evidence whether there may be indicators of a loss in investment value below carrying value.

After considering the weight of available evidence, if it is determined that there is a indication of loss in investment value, we will perform a fair value analysis.

If the resulting fair value is less than the carrying value, we will determine if this loss in value is OTTI, and we will recognize any OTTI in the income statement as an impairment.

This evaluation requires significant judgment regarding, but not limited to, the severity and duration of the impairment;

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Interest collected is classified as an operating activity in our consolidated statements of cash flows.

Certain of our receivables may include the ability to defer required interest payments in exchange for increasing the receivable balance at the borrower’s option.

Receivables from certain projects are subordinate to preferred investors in a project who are allocated the majority of such projects’ cash in the early years of the investment.

Accordingly, such receivables may include the ability to defer scheduled interest payments in exchange for increasing our receivable balance.

We generally accrue this paid-in-kind (“PIK”) interest when collection is expected and cease accruing PIK interest if there is insufficient value to support the accrual or we expect that any portion of the principal or interest due is not collectible.

The change in PIK in any period is included in Change in accrued interest on receivables and investments in the operating section of our statement of cash flows.

We evaluate our receivables for an allowance as determined under ASC Topic 326 Financial Instruments- Credit Losses (“Topic 326”) and for our internally derived asset performance categories included in Note 6 to our financial statements on at least a quarterly basis and more frequently when economic or other conditions warrant such an evaluation.

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For periods following the reasonable and supportable forecast period, we revert to historical information when developing assumptions used in our estimates.

In developing our forecasts, we consider a number of qualitative and quantitative factors in our assessment, including a project’s operating results, loan-to-value ratio, any cash reserves, the ability of expected cash from operations to cover the cash flow requirements currently and into the future, key terms of the transaction, the ability of the borrower to refinance the transaction, other credit support from the sponsor or guarantor and the project’s collateral value.

In developing our forecasts, we consider a number of qualitative and quantitative factors in our assessment, which may include a project’s operating results, loan-to-value ratio, any cash reserves, the ability of expected cash from operations to cover the cash flow requirements currently and into the future, key terms of the transaction, the ability of the borrower to refinance the transaction, other credit support from the sponsor or guarantor and the project’s collateral value.

In addition, we consider the overall economic environment, the climate solutions sector, the effect of local, industry, and broader economic factors such as unemployment rates and power prices, the impact of any variation in weather and the historical and anticipated trends in interest rates, defaults and loss severities for similar transactions.

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Our real estate is generally leased to tenants on a triple net lease basis, whereby the tenant is responsible for all operating expenses relating to the property, generally including property taxes, insurance, maintenance, repairs and capital expenditures.

Certain real estate transactions may be characterized as “failed sale-leaseback” transactions as defined under ASC Topic 842, Leases , and thus are accounted for similarly to our commercial receivables as described above in Government and Commercial Receivables.

For our other real estate lease transactions that are classified as operating leases, the scheduled rental revenue typically varies during the lease term and thus rental income is recognized on a straight-line basis, unless there is considerable risk as to collectability, so as to produce a constant periodic rent over the term of the lease.

Certain real estate

transactions may be characterized as “failed sale-leaseback” transactions as defined under ASC Topic 842, Leases , and thus are accounted for similarly to our commercial receivables as described above in Government and Commercial Receivables.

For our real estate lease transactions that are classified as operating leases, the scheduled rental revenue typically varies during the lease term and thus rental income is recognized on a straight-line basis, unless there is considerable risk as to collectability, so as to produce a constant periodic rent over the term of the lease.

Accrued rental income is the aggregate difference between the scheduled rents that vary during the lease term and the income recognized on a straight-line basis and is recorded in other assets.

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We determined that the trusts used in securitizations are VIEs, as defined in ASC 810.

When we conclude that

we are not the primary beneficiary of certain trusts because we do not have power over those trusts’ significant activities, we do not consolidate the trust.

When we conclude that we are not the primary beneficiary of certain trusts because we do not have power over those trusts’ significant activities, we do not consolidate the trust.

We typically serve as primary or master servicer of these trusts;

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If the amortized cost of servicing assets is greater than the estimated fair value, we will recognize an impairment in net income.

Our other retained interest in securitized assets, the residual assets, are accounted for similar to available-for-sale debt securities and carried at fair value.

Our other retained interest in securitized assets, the residual assets, are accounted for similar to available-for-sale debt securities and carried at fair value with changes in fair value recorded in AOCI.

Income related to the residual assets is recognized using the effective interest rate method and included in fee income in our income statement.

Our residual assets are evaluated for impairment on a quarterly basis.

Our residual assets are evaluated for impairment on a quarterly basis under Topic 326.

A residual asset is impaired if its fair value is less than its carrying value.

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Convertible Notes

We have issued convertible senior notes that are accounted for in accordance with ASC 470-20, Debt with Conversion and Other Options , and ASC 815, Derivatives and Hedging (“ASC 815”) .

Under ASC 815, issuers of certain convertible debt instruments are generally required to separately account for the conversion option of the convertible debt instrument as either a derivative or equity, unless it meets the scope exemption for contracts indexed to, and settled in, an issuer’s own equity.

Since this conversion option is both indexed to our equity and can only be settled in our common stock, we have met the scope exemption, and therefore, we are not separately accounting for the embedded conversion option.

The initial issuance and any principal repayments are classified as financing activities and interest payments are classified as operating activities in our consolidated statements of cash flows.

If converted, the carrying value of each convertible note is reclassified into stockholders’ equity.

We have issued convertible and exchangeable senior notes (together, “Convertible Notes”) that are accounted for in accordance with ASC 470-20, Debt with Conversion and Other Options , and ASC 815, Derivatives and Hedging (“ASC 815”) .

Under ASC 815, issuers of certain convertible or exchangeable debt instruments are generally required to separately account for the conversion or exchange option of the debt instrument as either a derivative or equity, unless it meets the scope exemption for contracts indexed to, and settled in, an issuer’s own equity.

Since our conversion or exchange options are both indexed to our equity and can only be settled in our common stock, we have met the scope exemption, and therefore, we are not separately accounting for the embedded conversion or exchange options.

The initial issuance and any principal repayments are

classified as financing activities and interest payments are classified as operating activities in our consolidated statements of cash flows.

If converted or exchanged, the carrying value of each Convertible Note is reclassified into stockholders’ equity.

We elected and qualified to be taxed as a REIT for U.S.

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Equity Incentive Plan (as amended, the “2013 Plan”), which provides for grants of stock options, stock appreciation rights, restricted stock units, shares of restricted common stock, phantom shares, dividend equivalent rights, long-term incentive-plan units (“LTIP Units”) and other restricted limited partnership units issued by our Operating Partnership and other equity-based awards.

From time to time, we may grant equity or equity-based awards as compensation to our independent directors, employees, advisors, consultants and other personnel under our 2013 Plan.

Certain awards earned under the plan are based on achieving various performance targets, which are generally earned between 0 % and 200 % of the initial target, depending on the extent to which the performance target is met.

In addition to performance targets, certain LTIP units issued by our Operating Partnership also require a certain level of appreciation of partnership interests to occur before parity is reached and LTIP units can be converted to limited partnership units.

We record compensation expense for grants made under the 2013 Plan in accordance with ASC 718, Compensation—Stock Compensation .

In 2022, our board of directors approved the 2022 Hannon Armstrong Sustainable Infrastructure Capital, Inc.

Equity Incentive Plan (“the 2022 Plan”), which was subsequently approved by shareholders at our 2022 annual meeting of stockholders, for the purpose of continuing to provide equity-based incentive compensation to members of our senior management team, our independent directors, employees, advisers, consultants and other personnel.

From time to time, we may grant equity or equity-based awards as compensation to our independent directors, employees, advisors, consultants and other personnel under the 2022 Plan.

Certain awards earned under each plan are based on achieving various performance targets, which are generally earned between 0 % and 200 % of the initial target, depending on the extent to which the performance target is met.

In addition to performance targets, income or gain must be allocated by our Operating Partnership to certain LTIP Units issued by our Operating Partnership so that the capital accounts of such units are equalized with the capital accounts of other holders of OP units before parity is reached and LTIP Units can be converted to limited partnership units.

We record compensation expense for grants made in accordance with ASC 718, Compensation—Stock Compensation .

We record compensation expense for unvested grants that vest solely based on service conditions on a straight-line basis over the vesting period of the entire award based upon the fair market value of the grant on the date of grant.

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The grant date fair value of these awards was developed by an independent appraiser using a Monte Carlo simulation.

Forfeitures of unvested awards are recognized as they occur.

In the second quarter of 2022, our Board approved a retirement policy that provides for full vesting at retirement of any time-based awards that were granted prior to the date of retirement and permits the vesting of performance-based awards that were granted prior to the date of retirement according to the original vesting schedule of the award, subject to the achievement

of the applicable performance measures and without the requirement for continued employment.

Employees are eligible for the retirement policy upon meeting age and years of service criteria.

We record compensation expense for unvested grants through the date in which an employee meets the retirement criteria.

At implementation of this policy, we recorded compensation expense of $ 9 million to reflect unvested grants of employees who meet the retirement eligibility criteria.

Earnings Per Share

We compute earnings per share of common stock in accordance with ASC 260, Earnings Per Share .

Basic earnings per share is calculated by dividing net income attributable to controlling stockholders (after consideration of the earnings allocated to unvested grants under the 2013 Plan, if applicable) by the weighted-average number of shares of common stock outstanding during the period excluding the weighted average number of unvested grants under the 2013 Plan, if applicable (“participating securities” as defined in Note 12 to our financial statements in this Form 10-K).

Diluted earnings per share is calculated by dividing net income attributable to controlling stockholders (after consideration of the earnings allocated to unvested grants under the 2013 Plan, if applicable) by the weighted-average number of shares of common stock outstanding during the period plus other potential common stock instruments if they are dilutive.

Other potentially dilutive common stock instruments include

our unvested restricted stock, other equity-based awards, and convertible notes.

Basic earnings per share is calculated by dividing net income attributable to controlling stockholders (after consideration of the earnings allocated to unvested grants, if applicable) by the weighted-average number of shares of common stock outstanding during the period excluding the weighted average number of unvested grants, if applicable (“participating securities” as defined in Note 12 to our financial statements in this Form 10-K).

Diluted earnings per share is calculated by dividing net income attributable to controlling stockholders (after consideration of the earnings allocated to unvested grants, if applicable) by the weighted-average number of shares of common stock outstanding during the period plus other potential common stock instruments if they are dilutive.

Other potentially dilutive common stock instruments include our unvested restricted stock, other equity-based awards, and Convertible Notes.

The restricted stock and other equity-based awards are included if they are dilutive using the treasury stock method.

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When unvested grants are dilutive, the earnings allocated to these dilutive unvested grants are not deducted from the net income attributable to controlling stockholders when calculating diluted earnings per share.

The convertible notes are included if they are dilutive using the if-converted method.

The if-converted method removes interest expense related to the convertible notes from the net income attributable to controlling stockholders and includes the weighted average shares of potential common stock over the period issuable upon conversion of the note.

The Convertible Notes are included if they are dilutive using the if-converted method, which removes interest expense related to the Convertible Notes from the net income attributable to controlling stockholders and includes the weighted average shares of potential common stock over the period issuable upon conversion or exchange of the note.

No adjustment is made for shares of potential common stock that are anti-dilutive during a period.

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Commercial paper notes — — Level 3

Term loan facility 384 384 Level 3

Non-recourse debt 402 442 Level 3

Senior unsecured notes 1,546 1,784 Level 2

Convertible notes 186 152 Level 2

Convertible notes

2023 Convertible Senior Notes 137 143 Level 2

2025 Exchangeable Senior Notes 185 206 Level 2

Total Convertible Notes 322 349 Level 2

(1) The amortized cost of our investments as of December 31, 2022, was $ 12 million.

(2) Included in securitization assets on the consolidated balance sheet.

The amortized cost of our securitization assets as of December 31, 2021, was $ 194 million.

The amortized cost of our securitization residual assets as of December 31, 2022, was $ 224 million.

(3) Fair value and carrying value exclude unamortized financing costs.

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Government receivables 137 125 Level 3

Receivables held-for-sale 32 22 Level 3

Investments (1)

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Credit facilities $ 100 $ 100 Level 3

Commercial paper notes 50 50 Level 3

Non-recourse debt 476 440 Level 3

Senior unsecured notes 1,823 1,784 Level 2

Convertible notes 552 296 Level 2

Convertible notes:

2023 Convertible Senior Notes 16 8 Level 2

2025 Convertible Senior Notes 170 144 Level 2

Total Convertible Notes 186 152 Level 2

(1) The amortized cost of our investments as of December 31, 2021, was $ 17 million.

(2) Included in securitization assets on the consolidated balance sheet.

This amount excludes securitization servicing assets which are carried at amortized cost.

The amortized cost of our securitization assets as of December 31, 2020, was $ 141 million.

The amortized cost of our securitization residual assets as of December 31, 2021, was $ 194 million.

(3) Fair value and carrying value exclude unamortized financing costs.

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Purchases of investments 2 5

Principal payments on investments — ( 3 )

Sale of investments ( 7 ) ( 38 )

Realized gains on investments recorded in gain on sale of receivables and investments — 6

Unrealized gains (losses) on investments recorded in OCI ( 3 ) ( 4 )

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Estimated Fair Value Unrealized Losses (1)

Securities with a loss shorter than 12 months Securities with a loss longer than 12 months Securities with a loss shorter than 12 months Securities with a loss longer than 12 months

Count of Securities

Securities with a loss shorter than 12 months Securities with a loss longer than 12 months Securities with a loss shorter than 12 months Securities with a loss longer than 12 months Securities with a loss shorter than 12 months Securities with a loss longer than 12 months

(in millions)

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December 31, 2021 7 — 0.1 — 1 —

(1) Loss position is due to interest rates movements.

(1) Loss position is due to interest rates movements and is not indicative of credit deterioration.

We have the intent and ability to hold these investments until a recovery of fair value.

In determining the fair value of our investments, we used a market-based risk-free rate and a range of interest rate spreads of approximately 1 % to 4 % based upon transactions involving similar assets as of December 31, 2021 and 2020.

In determining the fair value of our investments, as of December 31, 2022 and 2021, we used a risk-free rate and added a range of interest rate spreads of approximately 1 % to 4 %, determined based upon recent transactions involving similar assets.

The weighted average discount rates used to determine the fair value of our investments as of December 31, 2022 and 2021 were 6.5 % and 3.6 %, respectively.

Securitization residual assets

The following table reconciles the beginning and ending balances for our Level 3 securitization residual assets that are carried at fair value on a recurring basis:

The following table reconciles the beginning and ending balances for our Level 3 securitization residual assets that are carried at fair value on a recurring basis, with changes in fair value recorded through AOCI:

For the year ended

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Collections of securitization residual assets ( 16 ) ( 17 )

Sales of securitization residual assets — ( 21 )

Unrealized gains (losses) on securitization residual assets recorded in OCI ( 63 ) ( 2 )

Balance, end of period $ 177 $ 210

In determining the fair value of our securitization residual assets, we used a market-based risk-free rate and a range of interest rate spreads of approximately 1 % to 4 % based upon transactions involving similar assets as of December 31, 2021 and 2020.

The following table illustrates our securitization residual assets in an unrealized loss position:

Estimated Fair Value Unrealized Losses (1)

Count of Assets

Assets with a loss shorter than 12 months Assets with a loss longer than 12 months Assets with a loss shorter than 12 months Assets with a loss longer than 12 months Assets with a loss shorter than 12 months Assets with a loss longer than 12 months

(in millions)

December 31, 2022 $ 118 $ 51 $ 27 $ 22 66 12

December 31, 2021 51 17 1 1 12 3

(1) Loss position is due to interest rates movements and is not indicative of credit deterioration.

We have the intent and ability to hold these investments until a recovery of fair value.

In determining the fair value of our securitization residual assets, as of December 31, 2022 and 2021, we used a market-based risk-free rate and added a range of interest rate spreads of approximately 1 % to 6 %, determined based upon recent transactions involving similar assets.

The weighted average discount rate used to determine the fair value of our securitization residual assets as of December 31, 2022 and 2021 was 6.8 % and 3.8 %, respectively.

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Our financial statements may include non-recurring fair value measurements related to acquisitions and non-monetary transactions, if any.

Assets acquired in a business combination are recorded at their fair value.

Assets acquired in a business combination, if any, are recorded at their fair value.

We may use third party valuation firms to assist us with developing our estimates of fair value.

See Note 6 for a discussion of a fair value measurement recorded during the year ended December 31, 2021 related to an equity method investment.

Concentration of Credit Risk

Commercial and government receivables, real estate leases, and debt investments consist primarily of receivables from various projects, U.S.

federal government-backed receivables, and investment grade state and local government receivables and do not, in our view, represent a significant concentration of credit risk.

federal government-backed receivables, and investment grade state and local government receivables and do not, in our view, represent a significant concentration of credit risk given the large number of diverse offtakers and other obligors of the projects.

Additionally, certain of our investments are collateralized by projects concentrated in certain geographic regions throughout the United States.

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The non-controlling interest holders are generally allocated their pro rata share of income, other comprehensive income and equity transactions.

The outstanding OP units held by outside limited partners represent less than 1 % of our outstanding OP units and are redeemable by the limited partners for cash, or at our option, for a like number of shares of our common stock.

The outstanding OP units not held by us represent approximately 1 % of our outstanding OP units and are redeemable by the limited partners for cash, or at our option, for a like number of shares of our common stock.

Non-controlling interest holders redeemed 2,777 OP units during the year ended December 31, 2022 for the same number of shares of our common stock.

No OP units were exchanged by non-controlling interest holders during the year ended December 31, 2021.

Non-controlling interest holders exchanged 57,400 OP units for the same number of shares of our common stock during the year ended December 31, 2020.

We have also granted to members of our leadership team and directors LTIP Units pursuant to the 2013 Plan.

We have also granted to members of our leadership team and directors LTIP Units pursuant to our equity incentive plans.

The LTIP Units issued to employees are held by HASI Management HoldCo LLC.

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However, the amended and restated agreement of limited partnership of the Operating Partnership (the “OP Agreement”) provides that “book gains,” or economic appreciation, in the Operating Partnership will be allocated first to the LTIP Units until the capital account per LTIP Units is equal to the capital account per-unit of the OP units.

Under the terms of the OP Agreement, the Operating Partnership will revalue its assets upon the occurrence of certain specified events, and any increase in valuation from the time of grant until such event will be allocated first to the holders of LTIP Units to equalize the capital accounts of such holders with the capital accounts of OP unit holders.

accounts of OP unit holders.

Once this has occurred, the LTIP Units will achieve full parity with the OP units for all purposes, including with respect to liquidating distributions and redemption rights.

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In computing gains and losses on securitizations, we use discount rates based on a review of comparable market transactions including Level 3 unobservable inputs which consist of base interest rates and spreads over these base rates.

Depending on the nature of the transaction risks, the discount rate ranged from 2 % to 8 %.

Depending on the nature of the transaction risks, the discount rate ranged from 3.7 % to 6.9 % during the year ended December 31, 2022.

As of December 31, 2022 and December 31, 2021, our managed assets totaled $ 9.8 billion and $ 8.8 billion, respectively, of which $ 5.5 billion and $ 5.2 billion, respectively, were securitized assets held in unconsolidated securitization trusts.

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The real estate is typically land and related lease intangibles for long-term leases to wind and solar projects.

In developing and evaluating performance against our credit criteria, we consider a number of qualitative and quantitative criteria including a project’s operating results, loan-to-value ratio, any cash reserves, the ability of expected cash from operations to cover the cash flow requirements currently and into the future, key terms of the transaction, the ability of the borrower to refinance the transaction, the financial and operating capability of the borrower, its sponsors or the obligor as well as any guarantors and the project’s collateral value.

In developing and evaluating performance against our credit criteria, we consider a number of qualitative and quantitative criteria which may include a project’s operating results, loan-to-value ratio, any cash reserves, the ability of expected cash from operations to cover the cash flow requirements currently and into the future, key terms of the transaction, the ability of the borrower to refinance the transaction, the financial and operating capability of the borrower, its sponsors or the obligor as well as any guarantors and the project’s collateral value.

In addition, we consider the overall economic environment, the climate solutions sector, the effect of local, industry and broader economic factors, the impact of any variation in weather and the historical and anticipated trends in interest rates, defaults and loss severities for similar transactions.

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Government Commercial

Receivable vintage (dollars in millions)

Receivable vintage (4)

(dollars in millions)

2022 $ — $ 639 $ — $ — $ 639

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Total receivables held-for-investment (5)

103 1,917 — 11 2,031

Allowance for loss on receivables

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Net receivables held-for-investment 103 1,881 — 6 1,990

125 1,291 8 — 1,424

Receivables held-for-sale — 85 — — 85

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Percent of Portfolio 2 % 97 % 1 % — % 100 %

Average remaining balance (6)

$ 6 $ 13 $ 11 $ 4 $ 12

(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.

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(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, 2021 which we have held on non-accrual status since 2017.

We expect to continue to pursue our legal claims with regards to these assets.

This category previously contained an equity method investment in a wind project with no book value due to our allocation of impairment losses recorded by the project sponsor.

We sold this equity method investment in the third quarter for nominal proceeds.

Loans in this category are placed on non-accrual status.

In the second quarter of 2022, we moved $ 11 million of loans we had made in a new market venture where the performance has not met expectations to this category from Category 2.

Previously included in this category were two commercial receivables with a combined total carrying value of approximately $ 8 million which were assignments of land lease payments from two wind projects that we had originated in 2014.

In 2017, the operator of the projects terminated the lease, at which time we filed a legal claim and placed these assets on non-accrual status.

In 2019, we received a court decision indicating that the owners of the projects were within their rights under the contract terms to terminate the lease which impacts the land lease assignments to us, at which time we reserved the receivables for their full carrying amount.

In the second quarter of 2022, we received a court decision indicating that our appeal was not successful, and accordingly we wrote off the full amount of the receivable.

(4) Receivable vintage refers to the period in which the relevant loan agreement is signed, and a given vintage may contain loan advances made in periods subsequent to the period in which the loan agreement was signed.

(5) Total reconciles to the total of the government receivables and commercial receivables lines of the consolidated balance sheets

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As they are part of large portfolios, they are not classified separately.

(6) Average remaining balance is calculated gross of allowance for loss on receivables and excludes approximately 174 transactions each with outstanding balances that are less than $ 1 million and that in the aggregate total $ 84 million.

As of December 31, 2022 our allowance for loan losses was $ 41 million based on our expectation for credit losses over the lives of the receivables in our Portfolio.

During 2021, our reserve was unchanged, as additional allowances associated with loans and loan commitments were offset by the release of certain loan-specific reserves.

During 2022, we recorded a provision for loss on receivables of $ 13 million primarily due to new loans and loan commitments.

Below is a summary of the carrying value, expected loan funding commitments, and allowance by type of receivable or “Portfolio Segment,” as defined by Topic 326, as of December 31, 2022 and 2021:

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(1) As of December 31, 2022, this category of assets include $ 1,212 million of mezzanine loans made on a non-recourse basis to special purpose subsidiaries of residential solar companies which are secured by residential solar assets where we rely on certain limited indemnities, warranties, and other obligations of the residential solar companies or their other subsidiaries.

Approximately $ 684 million of our commercial receivables are loans made to entities in which we also have non-controlling equity investments of approximately $ 108 million.

This total also includes $ 47 million of lease agreements where we hold legal title to the underlying real estate which are treated under GAAP as receivables since they were deemed to be failed sale/leaseback transactions as described in Note 2.

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We use assumptions related to these risks to estimate an allowance using a discounted cash flow analysis or the PD/LGD method as discussed in Note 2.

All of our commercial receivables are included in Performance Rating 1 in the Portfolio Performance table above, except for $ 11 million of receivables included in Performance Category 2 and the $ 8 million of receivables we have placed on non-accrual status which are included in Performance Rating 3.

All of our commercial receivables are included in Performance Rating 1 in the Portfolio Performance table above, except for the $ 11 million of receivables we have placed on non-accrual status which are included in Performance Rating 3.

For those assets in Performance Rating 1, the credit worthiness of the obligor combined with the various structural protections of our assets cause us to believe we have a low risk we will not receive our invested capital, however we recorded a $ 36 million allowance on these $ 1.9 billion in assets as a result of lower probability assumptions utilized in our allowance methodology.

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(in millions)

Beginning balance - January 1, 2020 (1)

Beginning balance - December 31, 2020 $ 36 $ —

Provision for loss on receivables — —

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Provision for loss on receivables 13 —

Write-off of allowance ( 8 )

Ending balance - December 31, 2022 $ 41 $ —

(1) Balance as of the adoption of Topic 326, which includes the pre-tax allowance for loss on receivables of $ 17 million recorded upon adoption which reflects our estimated loss as of that date under the new standard as well as the $ 8 million of receivables which were previously on non-accrual status and fully reserved.

Other than the $ 11 million of receivables discussed above with a Performance Rating of 3, we have no receivables which are on non-accrual status.

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Equity Method Investments

We have made non-controlling equity investments in a number of renewable energy and energy efficiency projects as well as in a joint venture that owns land with long-term triple net lease agreements to several solar projects that we account for as equity method investments.

We have made non-controlling equity investments in a number of climate solutions projects as well as in a joint venture that owns land with long-term triple net lease agreements to several solar projects that we account for as equity method investments.

As of December 31, 2022, we held the following equity method investments:

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Various Jupiter Equity Holdings, LLC $ 540

December 2020 Lighthouse Partnerships (1)

Various Lighthouse Partnerships (1)

Various Phase V Class A LLC 165

March 2020 University of Iowa Energy Collaborative Holdings LLC 130

Various Vivint Solar Asset 3 HoldCo Parent LLC 116

Various Other investees 530

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We have a preferred equity interest in Jupiter Equity Holdings, LLC (“Jupiter”) that owns nine operating onshore wind projects and four operating utility-scale solar projects with an aggregate capacity of approximately 2.3 gigawatts.

We have made capital contributions to Jupiter of approximately $ 540 million related to these projects.

We have made capital contributions to Jupiter of approximately $ 536 million related to these projects, reflecting final funding true-ups after all projects reached substantial completion.

The projects feature cash flows from fixed-price power purchase agreements and financial hedges with a weighted average contract life of 13 years, contracted with highly creditworthy off-takers and counterparties.

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In 2021, we modified this structure to include an additional project in the renewables portfolio and to be held through the four partnerships (“Lighthouse Partnerships”), bringing our total expected investment to $ 870 million.

We have made initial investments in the preferred cash equity interests of the Lighthouse Partnerships of approximately $ 388 million through December 31, 2021, and additional investments are expected to be made in 2022 as the projects become commercially operational.

We have made initial investments in the preferred cash equity interests of the Lighthouse Partnerships of approximately $ 433 million through December 31, 2022, and additional investments are expected to be made as the projects become commercially operational.

The Renewables Portfolio currently has contracted cash flows with a combined weighted average contract life of greater than 15 years with a diversified group of predominately investment grade corporate, utility, university, and municipal offtakers.

In 2021, we made approximately $ 15 million in equity contributions and made $ 10 million in member loans to one of the Lighthouse Partnerships for the settlement of hedging activity under one of the project’s power hedge agreements as a result of the February 2021 winter storms in Texas.

Each of the Lighthouse Partnerships are or will be governed by a limited liability company agreement between us and the sponsor serving as managing member and contain customary terms and conditions.

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We use the equity method of accounting to account for our preferred equity interest in each Lighthouse Partnership, and have elected to recognize earnings from this investment one quarter in arrears to allow for the receipt of financial information.

Other Equity method investments

In 2021 we restructured an equity method investment with a GAAP carrying value of $ 24 million to convert it to a $ 17 million loan.

The GAAP carrying value of this investment included amounts related to non-cash HLBV income that in normal course would have reversed over time.

Upon restructuring, we accelerated the reversal of $ 7 million of previously recorded non-cash HLBV income included in the carrying value of this investment through income from equity method investments on our income statement.

Also in 2021, we had a working capital loan with an outstanding principal balance of $ 18 million to one of our equity method investments which we exchanged for an additional equity investment in that investee.

Related party transactions

Of our commercial receivables, approximately $ 713 million are loans made to entities in which we also have non-controlling equity investments of approximately $ 338 million.

These equity method investments are LLCs taxed as partnerships that we have entered into with various renewable energy project sponsors, such as SunPower Corporation.

We negotiate the commercial terms of these loans with the other partner, and the assets against which the project sponsors are borrowing are contributed into the LLCs upon the execution of the loans.

Our equity investments allow us to participate in the residual economics of those contributed assets alongside the other partner, and our rights under the project operating agreements do not allow us to make any significant unilateral decisions regarding the terms of the arrangement.

Because the loans made to these entities are typically subordinate to senior debt and tax equity investors in the projects, these loans, which have maturities of over ten years , may accrue PIK interest in the early years of the project until sufficient cash flow is available for our interest payments.

Any change in PIK interest is included in Change in accrued interest on receivables and investments in the operating section of our statement of cash flows.

On a quarterly basis, we assess these loans for any impairment inclusive of any PIK interest accrued under CECL as discussed above under Receivables.

The following table provides additional detail on these related party transactions:

For the year ended December 31,

2022 2021 2020

(in millions)

Interest income from related party loans $ 60 $ 54 $ 38

Investments in related party loans 164 324 101

Principal collected from related party loans 87 71 61

Interest collected from related party loans 64 53 27

In addition to the above, in the second quarter of 2022, as part of a purchase and sale agreement with an equity investee, we exchanged three performing loans for equity interests in the same project companies.

The GAAP carrying value of the loans was $ 55 million, which were exchanged in a non-cash transaction for equity method investments with no gain or loss recognized at the time of exchange as calculated using discounted cash flows at a market interest rate.

Credit facilities and commercial paper notes

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We have two secured revolving credit facilities (our “Secured Credit Facilities”), a representation-based loan agreement (the “Rep-Based Facility”) and an approval-based loan agreement (the “Approval-Based Facility”) with various lenders, which mature in July 2023.

The Rep-Based Facility is a secured revolving limited-recourse credit facility, which we modified in March 2021 to have a maximum outstanding principal amount of $ 100 million, lowered from a previous amount of $ 250 million.

This modification resulted in a $ 1.5 million loss due to the acceleration of a portion of the related unamortized financing costs that was recognized in interest expense in 2021.

The Approval-Based Facility is a secured revolving recourse credit facility with a maximum outstanding principal amount of $ 200 million.

The Rep-Based Facility is a secured revolving limited-recourse credit facility, which has a maximum outstanding principal amount of $ 100 million, and the Approval-Based Facility is a secured revolving recourse credit facility with a maximum outstanding principal amount of $ 200 million.

The following table provides additional detail on our Secured Credit Facilities as of December 31, 2022:

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We have provided a limited guarantee covering the accuracy of the representations and warranties, and the repayment by the borrowers of certain amounts relating to any such financing is the exclusive remedy with respect to any breach of such representations and warranties under the Rep-Based Facility.

Inclusion of any financings of the Company in the borrowing base as collateral under the Approval-Based Facility will be subject to the approval of a super-majority of the lenders, and we have provided a guarantee of the Approval-Based Facility.

Inclusion of any financings of the Company in the borrowing base as collateral under the Approval-Based

Facility will be subject to the approval of a super-majority of the lenders, and we have provided a guarantee of the Approval-Based Facility.

The amount eligible to be drawn under the Secured Credit Facilities is based on a discount to the value of each included investment based upon the type of collateral or an applicable valuation percentage.

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Under the Approval-Based Facility, the applicable valuation percentage is 85 % in the case of certain approved financings and 67 % or such other percentage as the administrative agent may prescribe.

The Approval-Based Facility previously had an outstanding draw with a fixed amortization schedule that was prepaid in 2021.

We have approximately $ 1 million of remaining unamortized financing costs associated with the Secured Credit Facilities that have been capitalized and included in other assets on our balance sheet and are being amortized on a straight-line basis over the term of the Secured Credit Facilities.

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Unsecured revolving credit facilities

In April 2021, we entered into a $ 400 million 364 -day unsecured revolving credit facility (“Existing Revolving Credit Facility”) pursuant to a revolving credit agreement with a syndicate of lenders, replacing our then-existing $ 50 million unsecured revolving credit facility entered into in February 2021.

As of December 31, 2021, the outstanding balance on the Existing Revolving Credit Facility was $ 50 million, and it beared interest at a rate of 2.35 %.

As of December 31, 2021, we had less than $ 1 million of remaining unamortized financing costs associated with the Existing Revolving Credit Facility that have been capitalized and included in other assets on our balance sheet and are being amortized on a straight-line basis over the term of the Existing Revolving Credit Facility.

In February 2022, the Existing Revolving Credit Facility was replaced with a $ 600 million unsecured revolving credit facility (“New Revolving Credit Facility”), which matures in February 2025.

The Existing Revolving Credit Facility bears interest at a rate of the LIBOR or prime rate plus applicable margins based on our current credit rating, which may be adjusted downward up to 0.05 % to the extent our Portfolio achieves certain targeted levels of carbon emissions avoidance as measured by our CarbonCount metric.

As of the inception of the unsecured revolving credit facility, the applicable margins are 2.25 % for LIBOR-based loans and 1.25 % for prime rate-based loans.

The New Revolving Credit facility bears interest at a rate of SOFR plus applicable margins, which may be adjusted downward up to 0.10 % to the extent our Portfolio achieves certain targeted levels of carbon emissions avoidance.

The initial applicable margins are 1.875 % for Term SOFR Rate-based loans and 0.875 % for prime rate-based loans.

Both unsecured revolving credit facilities have commitment fee based on our current credit rating.

Both unsecured revolving credit facilities contain terms, conditions, covenants, and representations and warranties that are customary and typical for transactions of this nature, including various affirmative and negative covenants, and limitations on the incurrence of liens and indebtedness, investments, fundamental organizational changes, dispositions, changes in the nature of business, transactions with affiliates, use of proceeds, stock repurchases, and dividends we can declare.

Both unsecured revolving credit facilities also include customary events of default and remedies.

At our option, upon maturity of the New Revolving Credit Facility, we have the ability to convert amounts borrowed into term loans for a fee equal to 1.875 % of the term loan amounts.

In February 2022, we entered into a $ 600 million unsecured revolving credit facility pursuant to a revolving credit agreement with a syndicate of lenders which matures in February 2025, replacing our then-existing $ 400 million unsecured revolving credit facility entered into in February 2021.

As of December 31, 2022, there were no outstanding balances on the unsecured revolving credit facility.

As of December 31, 2022, we had less than $ 3 million of remaining unamortized financing costs associated with the unsecured revolving credit facility that have been capitalized and included in other assets on our balance sheet and are being amortized on a straight-line basis over the term of the unsecured revolving credit facility.

The unsecured revolving credit facility has a committee fee based on our current credit rating and bears interest at a rate of the SOFR or prime rate plus applicable margins based on our current credit rating, which may be adjusted downward up to 0.10 % to the extent our Portfolio achieves certain targeted levels of carbon emissions avoidance as measured by our CarbonCount metric.

The current applicable margins are 1.875 % for Term SOFR Rate-based loans and 0.875 % for prime rate-based loans.

The unsecured revolving credit facility contains terms, conditions, covenants, and representations and warranties that are customary and typical for transactions of this nature, including various affirmative and negative covenants, and limitations on the incurrence of liens and indebtedness, investments, fundamental organizational changes, dispositions, changes in the nature of business, transactions with affiliates, use of proceeds, stock repurchases, and dividends we can declare.

The unsecured revolving credit facility also includes customary events of default and remedies.

At our option, upon maturity of the unsecured revolving credit facility, we have the ability to convert amounts borrowed into term loans for a fee equal to 1.875 % of the term loan amounts.

CarbonCount Green Commercial Paper Note Program

In September 2021, we entered into an agreement allowing us to issue commercial paper notes, in amounts up to $ 100 million outstanding at any time.

We obtained an irrevocable direct-pay letter of credit in an amount not to exceed $ 100 million from Bank of America, N.A, to support these obligations which expires in December 2022.

In December 2022, we renewed an agreement allowing us to issue commercial paper notes, in amounts up to $ 100 million outstanding at any time.

We obtained an irrevocable direct-pay letter of credit in an amount not to exceed $ 100 million from Bank of America, N.A, to support these obligations which expires in June 2024.

Commercial paper notes will not be redeemable, will not be subject to voluntary prepayment and are not to exceed 397 days.

The proceeds of our commercial paper notes are used to acquire or refinance, in whole or in part, eligible green projects, including assets that are neutral to negative on incremental carbon emissions.

In December 2021, we issued $ 50 million in green commercial paper notes which mature in March 2022, bearing a total borrowing rate of 1.26 %.

As of December 31, 2022, we have no green commercial paper notes outstanding.

Green commercial paper notes will be issued at a discount based on market pricing, subject to broker fees of 0.10 %.

For issuance of the letter of credit, we will pay 0.95 % on any drawn letter of credit amounts to Bank of America, N.A., and 0.40 % on any unused letter of credit capacity.

For issuance of the letter of credit, we will pay 0.95 % on any drawn letter of credit amounts to Bank of America, N.A., and 0.40 %

on any unused letter of credit capacity.

Fees paid on the drawn letters of credit may be reduced by up to 0.05 % to the extent our Portfolio achieves certain targeted levels of carbon emissions avoidance as measured by our CarbonCount metric.

As of December 31, 2021, we have approximately $ 1 million of remaining unamortized financing costs associated with the commercial paper program and associated letter of credit that have been capitalized and included in other assets on our balance sheet and are being amortized on a straight-line basis over the term of the commercial paper program.

As of December 31, 2022, we have no remaining unamortized financing costs associated with the commercial paper program and associated letter of credit.

The associated letter of credit contains terms, conditions, covenants, and representations and warranties that are customary and typical for a transaction of this nature, including various affirmative and negative covenants, and limitations on the incurrence of liens and indebtedness, investments, fundamental organizational changes, dispositions, changes in the nature of business, transactions with affiliates, use of proceeds, stock repurchases and dividends we declare.

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(dollars in millions)

HASI Sustainable Yield Bond 2015-1A $ 77 $ 81 4.28 % October 2034 $ — $ 133 $ 134 Receivables, real estate and real estate intangibles

HASI Sustainable Yield Bond 2015-1B Note (1)

— 13 5.41 % October 2034 — — 134 Class B Bond of HASI Sustainable Yield Bond 2015-1

HASI SYB Trust 2016-2 62 67 4.35 % April 2037 — 65 71 Receivables

HASI ECON 101 Trust (2)

— 126 3.57 % May 2041 — — 133 Receivables and investments

HASI SYB Trust 2017-1 146 150 3.86 % March 2042 — 203 205 Receivables, real estate and real estate intangibles

Lannie Mae Series 2019-1 93 95 3.68 % January 2047 — 107 107 Receivables, real estate and real estate intangibles

HASI Sustainable Yield Bond 2015-1A $ 73 $ 77 4.28 % October 2034 $ — $ 136 $ 139 Receivables, real estate, real estate intangibles, and restricted cash

HASI SYB Trust 2016-2 56 62 4.35 % April 2037 — 63 70 Receivables and restricted cash

HASI SYB Trust 2017-1 141 146 3.86 % March 2042 — 231 208 Receivables, real estate, real estate intangibles, and restricted cash

Lannie Mae Series 2019-1 90 93 3.68 % January 2047 — 120 110 Receivables, real estate, real estate intangibles, and restricted cash

Other non-recourse debt (1)

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Non-recourse debt (2)

(1) The Company repurchased this note in 2021.

(2) In 2021, contractual terms were modified resulting in the deconsolidation of both this debt and the related pledged assets.

We recognized a loss of approximately $ 3 million, which is included in gain on sale of receivables and investments in our income statement.

(1) Other non-recourse debt consists of various debt agreements used to finance certain of our receivables.

Scheduled debt service payment requirements are equal to or less than the cash flows received from the underlying receivables.

(4) The total collateral pledged against our non-recourse debt was $ 573 million and $ 723 million as of December 31, 2021 and December 31, 2020, respectively.

In addition, $ 24 million and $ 23 million of our restricted cash balance was pledged as collateral to various non-recourse loans as of December 31, 2021 and December 31, 2020, respectively.

(2) The total collateral pledged against our non-recourse debt was $ 632 million and $ 592 million as of December 31, 2022 and December 31, 2021, respectively, which includes $ 20 million and $ 19 million of restricted cash balance was pledged for debt service as of December 31, 2022 and December 31, 2021, respectively.

We have pledged the financed assets, and typically our interests in one or more parents or subsidiaries of the borrower that are legally separate bankruptcy remote special purpose entities as security for the non-recourse debt.

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Senior Unsecured Notes

We have outstanding senior unsecured notes issued jointly by certain of our TRS and are guaranteed by the Company and certain other subsidiaries (the “Senior Unsecured Notes”), including $ 1 billion of senior notes due 2026 (“2026 Notes”) issued in June 2021.

Proceeds from the 2026 Notes were used to redeem the 2024 Notes as described below.

We have outstanding senior unsecured notes issued jointly by certain of our TRS and are guaranteed by the Company and certain other subsidiaries (the “Senior Unsecured Notes”).

The Senior Unsecured Notes are subject to covenants that limit our ability to incur additional indebtedness and require us to maintain unencumbered assets of not less than 120 % of our unsecured debt.

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The Senior Unsecured Notes impose certain requirements in the event that we merge with or sell substantially all of our assets to another entity.

The proceeds of our Senior Unsecured Notes are used to acquire or refinance, in whole or in part, eligible green projects, including assets that are neutral to negative on incremental carbon emissions.

We allocate an amount equal to the net proceeds of our Senior Unsecured Notes to the acquisition or refinance of, in whole or in part, eligible green projects, including assets that are neutral to negative on incremental carbon emissions.

The following are summarized terms of the Senior Unsecured Notes:

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(in millions)

2024 Notes $ — (1)

July 15, 2024 5.25 % January 15th and

July 15th July 15, 2021

2025 Notes 400 April 15, 2025 6.00 % April 15 and

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September 15, 2030 3.75 % February 15th and August 15th September 15, 2022 (3)

(1) The first $ 350 million issuance of 2024 Notes was priced at par.

We subsequently issued $ 150 million of the $ 500 million aggregate principal amount of the 2024 Notes for total proceeds of $ 157 million ($ 155 million net of issuance costs) at an effective interest rate of 4.13 %.

The 2024 Notes were redeemed in June 2021 using a portion of the proceeds from the 2026 Notes.

We recognized a loss of $ 15 million upon redemption for the redemption premium and the acceleration of debt issuance cost and premium amortization which is recorded in interest expense in our income statement.

(1) Prior to this date, we may redeem, at our option, some or all of the 2025 Notes or 2026 Notes for the outstanding principal amount plus the applicable “make-whole” premium as defined in the indenture governing the 2025 Notes or 2026 Notes plus accrued and unpaid interest through the redemption date.

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Convertible Senior Notes

We have outstanding $ 152 million aggregate principal amount of convertible senior notes (“Convertible Senior Notes”), including $ 144 million of principal amount convertible senior notes due August 15, 2023 issued in August 2020 at a stated interest rate of 0 %.

Holders may convert any of their convertible notes into shares of our common stock at the applicable conversion ratio at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date, unless the Convertible Senior Notes have been previously redeemed or repurchased by us.

The following are summarized terms of the Convertible Senior Notes as of December 31, 2021:

Outstanding Principal Amount Maturity Date Stated Interest Rate Interest Payment Dates Conversion Ratio Conversion Price Issuable Shares Dividend Threshold Amount (1)

We have outstanding $ 144 million aggregate principal amount of convertible senior notes and $ 200 million aggregate principal amount of exchangeable senior notes, together “Convertible Notes”.

Holders may convert or exchange any of their Convertible Notes into shares of our common stock at the applicable conversion or exchange ratio at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date, unless the Convertible Notes have been previously redeemed or repurchased by us.

The following are summarized terms of the Convertible Notes as of December 31, 2022:

Outstanding Principal Amount Maturity Date Stated Interest Rate Interest Payment Dates Conversion/Exchange Ratio Conversion/ Exchange Price Issuable Shares Dividend Threshold Amount (1)

(in millions) (in millions)

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2023 0.000 % N/A 20.7767 $ 48.13 3.0 $ 0.340

2025 Exchangeable Senior Notes 200 (3)

2025 0.000 % N/A 17.6873 $ 56.54 3.5 $ 0.375

(1) The conversion ratio is subject to adjustment for dividends declared above these amounts per share per quarter and certain other events that may be dilutive to the holder.

(2) During the year ended December 31, 2021, $ 142 million in principal amount of 2022 Convertible Senior Notes were converted into 5.2 million shares of common stock.

For both the 2022 Convertible Senior Notes and the 2023 Convertible Senior Notes, following the occurrence of a make-whole fundamental change, we will, in certain circumstances, increase the conversion rate for a holder that converts its convertible notes in connection with such make-whole fundamental change.

(2) In March 2022, we exercised a redemption option to call the remaining $ 8.1 million of 2022 Convertible Senior Notes.

$ 7.6 million principal of the notes was converted prior to the effectiveness of the redemption option, with the remaining notes being redeemed for cash of $ 0.5 million

(3) The 2025 Exchangeable Senior Notes accrete to a premium at maturity equal to 3.25 % per annum.

The current balance including accreted premium is $ 205 million.

For the 2023 Convertible Senior Notes, following the occurrence of a make-whole fundamental change, we will, in certain circumstances, increase the conversion rate for a holder that converts its convertible notes in connection with such make-whole fundamental change.

There are no cash settlement provisions in the convertible notes and the conversion option can only be settled through physical delivery of our common stock.

Additionally, upon the occurrence of certain fundamental changes involving us, holders of the convertible notes may require us to redeem all or a portion of their convertible notes for cash at a price of 100 % of the principal amount outstanding, plus accrued and unpaid interest.

We have a redemption option to call the 2022 Convertible Senior Notes prior to maturity (i) on or after March 1, 2022 and (ii) at any time if such a redemption is deemed reasonably necessary to preserve our qualification as a REIT, with the holder of the notes having the option of converting prior to our redemption becoming effective.

The redemption price will be equal to the principal of the notes being redeemed, plus accrued and unpaid interest.

In the event of redemption after March 1, 2022, there will be an additional make-whole premium paid to the holder of the redeemed notes unless the redemption is deemed reasonably necessary to preserve our qualification as a REIT.

Additionally, upon the occurrence of certain fundamental changes involving us, holders of the 2023 Convertible Notes may require us to redeem all or a portion of their notes for cash at a price of 100 % of the principal amount outstanding, plus accrued and unpaid interest.

We may redeem the 2023 Convertible Senior Notes at any time only if such a redemption is deemed reasonably necessary to preserve our qualification as a REIT.

The following table presents a summary of the components of our Senior Convertible Notes:

In April 2022, certain of our TRS jointly issued $ 200 million of 0.00 % green exchangeable senior notes due 2025

that are guaranteed by us and certain other subsidiaries and may, under certain conditions, be exchangeable

for our common stock.

The notes accrete to a premium at maturity at an effective rate of 3.25 % annually.

Upon any exchange, holders will receive a number of shares of our common stock equal to the product of (i)

the aggregate initial principal amount of the notes to be exchanged, divided by $1,000 and (ii) the applicable exchange

rate, which will initially be 17.6873, equivalent to an initial exchange price of approximately $ 56.54 per share, plus cash

in lieu of fractional shares.

We intend to allocate an amount equal to the net proceeds of this offering to the

acquisition or refinancing of, in whole or in part, new and/or existing eligible green projects, which include assets that are

neutral to negative on incremental carbon emissions.

The following table presents a summary of the components of our Convertible Notes:

As of and for the year ended December 31,

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Principal $ 344 $ 152

Accrued interest — 2

Unamortized financing costs ( 5 ) ( 2 )

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Interest expense $ 7 $ 6

CarbonCount Term Loan Facility

On November 1, 2022, we entered into an unsecured term loan facility with a syndicate of banks which has an outstanding principal amount of $ 383 million.

Principal amounts under the term loan facility will bear interest at a rate of Term SOFR plus applicable margins based on our current credit rating, which may be adjusted downward up to 0.10 % to the extent our Portfolio achieves certain targeted levels of carbon emissions avoidance, as measured by our CarbonCount metric.

As of December 31, 2022, the applicable margin is 2.225 % and the current interest rate is 6.75 %.

The coupon on any drawn amounts will be reset at monthly, quarterly, or semi-annual intervals at our election.

Interest is due and payable quarterly.

Beginning six months after the effective date of the facility, 1.25 % of the outstanding principal balance will be due quarterly.

The term loan facility has a maturity date of October 31, 2025, and loans under the facility can be prepaid without penalty.

We intend to allocate an amount equal to the net proceeds of this offering to the acquisition or refinancing of, in whole or in part, new and/or existing eligible green projects, which include assets that are neutral to negative on incremental carbon emissions.

Principal and interest payments which were due under the term loan facility as of December 31, 2022 are as follows:

Year Ending December 31, Future maturities

(in millions)

Unamortized financing costs ( 4 )

Carrying Value $ 380

The term loan facility contains terms, conditions, covenants, and representations and warranties that are customary and typical for a transaction of this nature, including various affirmative and negative covenants, and limitations on the incurrence of liens and indebtedness, investments, fundamental organizational changes, dispositions, changes in the nature of business, transactions with affiliates, use of proceeds, stock repurchases and dividends we declare.

The term loan facility also includes customary events of default and remedies.

Commitments and Contingencies

We lease office space at our headquarters in Annapolis, Maryland under an operating lease entered into in 2011 and amended in 2013 and 2017.

Lease payments under this lease commenced in 2012 and incremental payments related to the amendments commenced in 2014 and 2017.

The lease expires in 2027.

In 2021, we signed a lease for new office space which expires in 2033, and expect to begin subleasing the prior space in 2023.

We lease office space at our headquarters in Annapolis, Maryland under an operating lease entered into in 2021 which expires in 2033.

We have a lease related to our previous office space entered into in 2011 and amended in 2013 and 2017.

Lease payments under this prior lease commenced in 2012 and incremental payments related to the amendments commenced in 2014 and 2017.

The lease expires in 2027, and we expect to begin subleasing this space in 2023.

The leases provide for operating expense reimbursements and annual escalations that are amortized over the respective lease terms on a straight-line basis.

Rent expense was less than $ 1 million for each of the years ended December 31, 2021, 2020, and 2019, respectively.

Rent expense related to both of these leases was less than $ 1 million for each of the years ended December 31, 2022, 2021, and 2020, respectively.

Future gross minimum lease payments are approximately $ 1 million per year during the remaining term of the leases.

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Guarantees and other commitments

We made a guarantee related to the financing of one of our joint venture entities that owns debt securities of energy efficiency projects.

The entity entered into a financing arrangement where we had guaranteed the obligations of the entity related to this financing, which includes collateral posting requirements as well as repayment of the financing at maturity in December 2021, which was paid as scheduled.

We have no performance obligations remaining under this guarantee as of December 31, 2021.

In the third quarter of 2022, we made a guarantee related to the financing of three of our joint venture entities that own debt securities of energy efficiency projects.

We received $ 64 million of the proceeds of this financing arrangement, and in turn have guaranteed the obligations of the entity related to this financing, which includes collateral posting requirements as well as repayment of the financing at maturity in February 2023.

In February 2023, we extended this agreement until May 2023.

As of December 31, 2022, our maximum obligation under this guarantee is approximately $ 80 million.

We believe the likelihood of having to perform under the guarantee is remote, have recorded no liability associated with this guarantee, and presently have not been required to post collateral for this guarantee as the assets of the joint venture entities are enough to support the financing obligation.

We have executed a separate agreement with our joint venture partner pursuant to which it is liable for repayment to us 15 % of this guarantee obligation.

In connection with some of our transactions, we have provided certain limited representations, warranties, covenants and/or provided an indemnity against certain losses resulting from our own actions, including related to certain investment tax credits.

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Dividends and Distributions

Our board of directors declared the following dividends in 2020 and 2021:

Our Board declared the following dividends in 2021, 2022, and 2023:

Announced Date Record Date Pay Date Amount per share

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01/6/2023 0.375

02/16/2023 04/3/2023 04/10/2023 0.395

(1) These dividends are treated as distributions in the following year for tax purposes.

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We may offer the securities directly, through agents, or to or through underwriters by means of ordinary brokers’ transactions on the NYSE or otherwise at market prices prevailing at the time of sale or at negotiated prices and may include “at the market” (“ATM”) offerings, to or through a market maker or into an existing trading market on an exchange or otherwise.

In January 2023, we established a dividend reinvestment and stock purchase plan, allowing stockholders and holders of OP Units (including LTIP Units) to purchase shares of our common stock by reinvesting cash dividends or distributions received.

We completed the following public offerings (including ATM issuances) of our common stock in 2021 and 2022:

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Q1 2021 ATM 1.639 $ 63.55 $ 103

Q2 2021 None — — —

Q3 2021 ATM 0.857 57.56 49

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Q2 2022 ATM 0.731 38.91 28

Q2 2021 None — — —

Q3 2022 ATM 1.346 36.85 49

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(2) Net proceeds from the offerings are shown after deducting underwriting discounts, commissions and other offering costs.

Equity-based Compensation Awards under our 2013 Plan

Equity-based Compensation Awards

We have 7,500,000 awards authorized for issuance under our 2022 Plan.

As of December 31, 2022, we have issued awards with service, performance and market conditions and have 7,435,731 awards remaining available for issuance.

During the year ended December 31, 2021, our board of directors awarded employees and directors 434,159 shares of restricted stock, restricted stock units, and LTIP Units that vest from 2022 to 2025.

During the year ended December 31, 2022, our Board awarded employees and directors 396,591 shares of restricted stock, restricted stock units, and LTIP Units that vest from 2023 to 2027.

Refer to Note 4 for background on the LTIP Units.

A summary of equity-based compensation expense and the fair value of shares and LTIP Units vested on the vesting date for the years ended December 31, 2021, 2020, and 2019 is as follows:

A summary of equity-based compensation expense and the fair value of shares and LTIP Units vested on the vesting date for the years ended December 31, 2022, 2021, and 2020 is shown below.

In 2022, we adopted a retirement policy which provides for full vesting at retirement of any time-based awards that were granted prior to the date of retirement and permits the vesting of performance-based awards that were granted prior to the date of retirement according to the original vesting schedule of the award, subject to the achievement of the applicable performance measures.

Employees are eligible for the retirement policy upon meeting age and years of service criteria.

Upon adoption of the policy, we recognized any remaining unrecognized share based compensation expense for awards to employees who met the retirement criteria at the time of adoption and accelerated the recognition of expense for employees who will meet the criteria prior to the vesting of their existing awards.

2022 2021 2020

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The total unrecognized compensation expense related to awards of shares of restricted stock, restricted stock units, and LTIP Units was approximately $ 13 million as of December 31, 2022.

We expect to recognize compensation expense related to these awards over a weighted-average term of approximately 2 years.

We expect to recognize compensation expense related to these awards over a weighted-average term of approximately 1 year.

A summary of the unvested shares of restricted common stock that have been issued is as follows:

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Granted 86,274 65.28 5.6

Incremental performance shares granted 51,500 21.09 1.1

Vested ( 103,000 ) 21.09 ( 2.1 )

Forfeited — — —

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Certain share-based awards are included in the diluted share count to the extent they are dilutive as discussed in Note 2.

To the extent our Senior Convertible Notes are dilutive under the if-converted method, we add back the interest expense to the numerator and include the weighted average shares of potential common stock over the period issuable upon conversion of the note in the denominator in calculating dilutive EPS as described in Note 2.

To the extent our Convertible Notes are dilutive under the if-converted method, we add back the interest expense to the numerator and include the weighted average shares of potential common stock over the period issuable upon conversion of the note in the denominator in calculating dilutive EPS as described in Note 2.

The computation of basic and diluted earnings per common share of common stock is as follows:

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We have non-controlling unconsolidated equity investments in renewable energy and energy efficiency projects as well as in a joint venture that owns land with long-term triple net lease agreements to several solar projects.

During the years ended December 31, 2021, 2020, and 2019 we recognized income (loss) of $ 126 million, $ 48 million, and $ 64 million respectively, from our equity method investments.

During the years ended December 31, 2022, 2021, and 2020 we recognized income of $ 31 million, $ 126 million, and $ 48 million respectively, from our equity method investments.

We describe our accounting for the non-controlling equity investments in Note 2.

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As described in Note 2, any difference between the amount of our investment and the amount of our share of underlying equity is generally amortized over the life of the assets and liabilities to which the differences relate.

Vivint Solar Asset 3 Borrower, LLC Rosie Targetco, LLC

Other Investments (1)

Lighthouse Renewable HoldCo II LLC Other Investments (1)

Balance Sheet in millions

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Revenue ( 35 ) (2)

Income from continuing operations 3 ( 2 ) ( 493 ) ( 492 )

Net income 3 ( 2 ) ( 493 ) ( 492 )

Income (loss) from continuing operations ( 61 ) ( 340 ) ( 401 )

Net income (loss) ( 61 ) ( 340 ) ( 401 )

For the year ended December 31, 2021

Revenue 1 139 140

Income from continuing operations ( 2 ) ( 5 ) ( 232 ) ( 239 )

Net income ( 2 ) ( 5 ) ( 232 ) ( 239 )

Income (loss) from continuing operations — ( 577 ) ( 577 )

Net income (loss) — ( 577 ) ( 577 )

For the year ended December 31, 2020

Revenue — 343 343

Income from continuing operations — — ( 97 ) ( 97 )

Net income — — ( 97 ) ( 97 )

Income (loss) from continuing operations — ( 222 ) ( 222 )

Net income (loss) — ( 222 ) ( 222 )

(1) Represents aggregated financial statement information for investments not separately presented.

(2) Amount contains $ 34 million of mark-to-market losses on energy swaps which do not qualify for hedge accounting.

Defined Contribution Plan

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Under the plan, we provide a dollar for dollar match for the first 4 % of the employee’s contributions and a $0.50 per dollar match for the next 2 % of employee contributions.

We contributed less than $ 1 million under the plan for the years ended December 31, 2021, 2020, and 2019, respectively.

We contributed approximately $ 1 million under the plan for the years ended December 31, 2022, and less than $ 1 million during the years ended December 31 2021, and 2020.

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data