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Operator
This afternoon, Hinton Armstrong distributed a press release detailing our fourth quarter and full year 2021 results, a copy of which is available on our website. This conference call is being webcast live on the Investor Relations page of our website, where a replay will be available later today. Before the call begins, I would like to remind you that some of the comments made in the course of this call are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended, and Section 21E of the Securities and Exchange Act of 1934 as amended. The company claims the protections of the safe harbor for forward-looking statements contained in such sections. The forward-looking statements made in this call are subject to the risks and uncertainties described in the risk factors section of the company's Form 10-K and other filings with the SEC. Actual results may differ materially from those described during the call. In addition, all forward-looking statements are made as of today, and the company does not undertake any responsibility to update any forward-looking statements based on new circumstances or revised expectations. During this call, we will primarily discuss non-GAAP financial measures, which we believe help investors gain a meaningful understanding of our core financial results and guidance. A presentation of this information is not intended to be considered an isolation or as a substitute for the financial information presented in accordance with GAAP. A reconciliation of GAAP to non-GAAP financial measures is available on our posted earnings release and slide presentation. Joining me on today's call are Jeff Eichel, the company's chairman and CEO, and Jeff Lipson, our CFO and COO. With that, I'd like to turn the call over to Jeff, who will begin on slide three. Jeff? Thank you, Chad, and good afternoon, everyone.
Hinton Armstrong
Today we are delighted to report another outstanding year here at Hannon Armstrong, with distributable earnings up 21% to $1.88 per share, net investment income up 52% to $134 million, our portfolio up 24% to $3.6 billion, and we've also increased our reported pipeline to more than $4 billion. up a billion dollars from our last report. And this comes after closing 1.7 billion in 2021. In addition, despite macroeconomic and industry headwinds, which we'll discuss, we have the confidence in our business to increase guidance for annual growth and distributable EPS to 10% to 13% and extend that guidance one additional year to 2024. We're also guiding to 5% to 8% annual growth in our dividend through 2024. And consistent with that, declaring a dividend today of 37.5 cents, which represents a 7% increase over our dividend last quarter. On this page, we also highlight the carbon count of one transaction in order to generate more understanding of this important climate reporting metric. Our featured transaction is a 452 megawatt grid-connected solar project in Texas being developed by Clearway. and is incremental to the $660 million framework agreement with them we announced in late 2020. This particular project has an above average carbon count of 1.3 because the power generated by this project largely offsets natural gas power generation in Texas. While every investment we make improves our climate future, not every investment is equally efficient. In doing so, we believe measuring and reporting with this level of rigor is where the market needs to go. Turning to slide four, we'll give more color on the increase in extension of our distributable EPS guidance. As you may recall, we gave 7% to 10% growth guidance this time last year through 2023. Given the strength we see in the climate solutions market, as reflected in our pipeline, it is appropriate to increase guidance. The chart on this page reflects an extrapolation of the high and low ranges of our increased guidance. Actual results in any one year may be outside this span, of course, but we are confident in the overall trend through 2024. We're also updating our dividend growth guidance, as I said, to 5% to 8% annually from the prior 3%, 5% range. Turning to slide five, we'd like to address the key industry challenges that are top of mind for investors and the impacts on both the industry and HACI. First, while rising interest rates and higher costs is a reversal of a long period of declining costs enjoyed by the clean energy industry, the industry is adapting to this new reality. There is really only one way to address rising costs in a capital-intensive industry like clean energy, raise the PPA price. And our clients are doing just that, with industry reports of a 5% increase in Q4 PPA prices and anecdotal evidence of prices continuing to increase in 2020. Most indications are that corporate PPA buyers understand that They are the ones to bear that price risk and generally accept it in order to meet their corporate sustainability goals. That doesn't mean these are easy or fast negotiations for our clients, but they are happening, and the end result is the clean energy industry will make the adjustment it needs to absorb higher costs. On the flip side, those same PPA counterparties are seeing higher natural gas and electricity prices from conventional energy suppliers, making higher clean energy PPA prices more palatable. Importantly, the HACI portfolio is largely unaffected, as most capital budgets and operating costs are fixed. And since new investments are made after factoring in any higher costs, there is minimal impact on our returns of future investments. Next, the pandemic and other industry-specific challenges have resulted in a very real supply chain delay for our clients and serves as a reminder of how hard our clients work to develop these projects. Fortunately, there are signs of improvement in some markets, but of course, challenges remain. These supply chain delays have had only a minimal impact on our business. We estimate transactions in our pipeline pushed out only one to two months on average through 2021 and into 2022. The failure of Congress to pass Build Back Better was disappointing to the industry, but our industry does not rely on any single piece of legislation to prosper. As a matter of fact, a little over a year ago, the industry expected the ITC and PTC to ramp down, and it is prepared for that still. That said, we consider passage of some climate provisions, like tax credit extensions, still viable and a tailwind to our already growing markets. Lastly, California's initial net metering 3.0 proposal was not positive for residential solar, of course, but many observers believe that the final rule will be more constructive for the industry. Whatever the final rule, the value proposition for residential solar plus storage remains strong. Given the structural seniority HACI enjoys in our residential solar investments, NEM 3.0 has minimal impact on our existing portfolio or future investments we may make. Moving to slide six. We provide an update on our 12-month pipeline, which we are now reporting, as I said, greater than $4 billion, up from the prior quarter of more than $3 billion. We currently have more than 40 programmatic clients who drive our pipeline into behind-the-meter, grid-connected, and sustainable infrastructure markets, and we are adding new clients each year as the climate solutions market grows. The bulk of our pipeline remains behind the meter and is weighted toward energy efficiency, while the grid-connected portion is weighted toward solar. Lastly, we note that newer investment opportunities comprise an increasing portion of our sustainable infrastructure pipeline, which itself has become a more meaningful portion of our overall pipeline. Slide 7 highlights an underappreciated strength of our business model, the diversity of our markets. When you compare the 2021 chart on the left with the 2020 chart on the right, it's clear that the success of each year was driven by different markets. In 2021, public sector behind the meter carried the day and wind in 2020. In each of these markets, there are multiple generally uncorrelated asset classes. In any given period, one of these asset classes may produce investment opportunities while others may not. That diversity in our origination platform and the breadth of our client base provides assurances that despite one asset class facing challenges, we should continue to find attractive climate solutions investments, which leads to consistent growth of the business. Now I'll turn it over to Jeff Hell to detail our portfolio performance and financial results.
Hannon Armstrong
Thanks, Jeff. Summarizing our 2021 results on the top of slide eight, we are reporting impressive growth in each of our key earnings metrics. In the upper left, we note distributable earnings per share growth was 21%, driven by a larger portfolio, higher equity method investment income, lower debt costs, and increased gain on sale income. In addition, as shown on the upper right, distributable net investment income was $134 million in 2021, reflecting annual growth of 52%, driven primarily by a larger portfolio and strong margins. And gain on sale from securitized assets was $80 million in 2021, representing a 21% annual increase and demonstrating our continued successful longstanding partnerships with our private debt investors. These substantial annual growth rates and distributable NII and gain on sale continue to demonstrate the success of our dual revenue model. On the bottom of slide eight, we display longer term trends. We have grown both our managed assets and balance sheet portfolio at a compound annual growth rate of greater than 15% over the last five years, while maintaining our portfolio yield and achieving a return on equity in the 10 to 11% range. Turning to slide nine, We detail our $3.6 billion balance sheet portfolio as of the end of 2021, which has grown 24% from $2.9 billion at year end 2020. Our portfolio yield remains steady year over year at 7.5% and now includes over 280 investments. The average investment size and weighted average life of the portfolio remained unchanged in 2021. With no asset class comprising more than 30% of the portfolio, The diversity of our business remains a persistent strength. Finally, we highlight the structural seniority in each of our asset classes, which coupled with the credit quality of our obligors leads to strong credit performance. Currently 99% of our investments continue to perform within our expectations. Turning to slide 10, we detail our fourth quarter portfolio reconciliation. We funded over $400 million of investments with the resulting portfolio balance of nearly $3.6 billion, an increase of 12% from the end of the third quarter. Funding expectations of previously closed transactions is shown on the right, with over $700 million expected to fund over the next two years. This amount is in addition to the portfolio growth we expect from investments in our current pipeline. We also note that the grid-connected NG portfolio, which we announced in July 2020, is now fully funded and is no longer reflected in this table. On slide 11, we highlight that we extended and upsized our carbon count unsecured revolving credit facility. Earlier in 2022, we increased our available capacity from 400 million to 600 million, extended the tenor from one to three years, and enhanced our carbon count pricing discount. Recapping our capital raising from 2021, we had a very successful year, issuing debt at 3.375 percent, equity at over $61 per share, and establishing two incremental unsecured funding sources. Our liquidity platform is well positioned to continue to efficiently and successfully fund the expected growth in our portfolio. We also continue to manage our market risk, utilizing modest leverage and maintaining substantial standby liquidity. Turning to slide 12, we address interest rate risk, which is certainly not unique to our business, and we take this risk very seriously in our enterprise risk management processes. allow me to make four points regarding interest rates on our business model. Number one, we have an investment portfolio of over $3.5 billion and fixed rate debt of approximately $2.5 billion, neither of which is impacted by subsequent changes in interest rates. Number two, while rising rates represent a real risk, we have demonstrated the ability to actively manage our exposures successfully, as shown in the chart on the left. In fact, since 2014, our first full year as a public company, we have delivered earnings growth at an 11% compound annual rate during a period in which 10-year treasuries were over 3% and well below 1%. Neither the level of rates nor the shape of the yield curve, both of which are depicted on this graph on the left, has meaningfully diminished our ability to grow earnings. This is in part because we actively manage our margins to our targeted ROE. Number three, in the graph on the right, we demonstrate how our margins have improved as we have maintained our portfolio yield despite a competitive investing environment while decreasing our cost of funds. Over the last four years, our interest expense as a percent of our average debt balance has dropped by 80 basis points to 4.6% as we have optimized our debt platform and taken advantage of tightening corporate debt spreads and the strong bid for credible green bonds. We remain confident over the long term our margins will be strong and relatively stable given the combination of our diverse investment strategy and attractive debt platform. even in periods of increasing investment volumes. We also expect these margins will facilitate continued strong growth in net investment income. And finally, number four, I'd note our securitization strategy has functioned well during our 40-year history, including in much higher interest rate environments. So we remain confident we can continue to utilize this source of capital as part of our funding and market risk strategies. In conclusion, our increase and extension of earnings guidance and our dividend increase reflect our confidence in the business model in a variety of interest rate environments. And with that, I'll turn the call back over to Jeff.
Hinton Armstrong
Thanks, Jeff. Great report. Turning to slide 13, we note a number of ESG accomplishments, not the least of which is embedded in our vision to make only investments that improve our climate future. This vision is still too rare among mainstream financial institutions. We declared our second annual social dividend to the Hannah Armstrong Foundation and its climate scholars program and other climate justice initiatives. These include partnerships to help nonprofits invest in energy efficiency upgrades, some in concert with our clients, support the development of resilience hubs in low-income neighborhoods, and to fund climate core fellows at historically black colleges and universities. Finally, we continue to ensure our governance documents and disclosures are aligned with best-in-class ESG practices that we and our investors expect of our company. We'll conclude here on slide 14. I'll highlight why we continue to present such a compelling value proposition for investors. First, we've demonstrated track record of results, including growing earnings 21% in 2021. Second, our markets and pipeline are large, growing, and diverse. Third, our funding platform drives stable margins and gives us the confidence to increase and extend guidance through 2024. Last but not least, we integrate our ESG activities into the entire business, including carbon count, strong employee participation in our foundation's activities. It is the deep integration of ESG into our mission that allows us to attract and retain the best people in the industry, and I thank them for all they do. With that, I'll ask the operator to open the line for questions.
Jeff
Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for your questions. Our first questions come from the line of Nate Crossett with Berenberg. Please proceed with your questions.
Berenberg
Hey, good evening, guys, and congrats on the results for the year. Maybe just a question on the new guidance. I was curious if you could maybe unpack some of the puts and takes. What are the yields that you guys are kind of assuming for this year? It's obviously been very consistent the last three years, and You know, it sounds like you have the ability to kind of underwrite in conjunction with interest rate moves. But I'm just curious, should we kind of be expecting kind of that mid-7% range? And then just in terms of the timing of the pipeline, if you could give us any color on when kind of the deal flow is weighted for this year.
Hinton Armstrong
I'm not sure we've ever gotten that question of where the pipeline is weighted. It's generally been pretty well spread out, and our ability to predict which quarter a given transaction closes in is not considered all that great. That's why we have a really large pipeline. We don't control the timing of closing, but it should be pretty well spread out over the year. I think you have some of the large grid connected assets that are going to have probably declining yields and you're going to have other asset classes and some of them will have higher yields that hopefully will blend out to where we are right now. There is another factor we're interested in is having some shorter term investment opportunities given inflation and rising interest rates. So some of these opportunities may be shorter duration than what we've typically done in the past.
Berenberg
Okay, that's helpful. You know, clearly have a pretty large spread over cost of capital. I'm just curious, have you guys seen any real changes in competition over the last three months? Or would you even say that maybe the macro back job is making it harder for competitors? Or what could you say on those issues?
Hinton Armstrong
Great question. I can't say there's a market uptick or downtick in competition. As I've said, we always have competition on virtually every deal. But given the programmatic relationships, we tend to win more than we lose. I would highlight the Texas solar project with Clearway as an incremental piece of business with Clearway in what is clearly a very competitive and attractive asset class. Okay, I'll leave it there.
Berenberg
Thank you.
Chris
Thank you.
Jeff
Thank you. Our next questions come from the line of Sophie Karp with KeyBank. Please proceed with your questions.
spk10
Hello, this is Brandon Allen for Sophie. Thank you for taking our question. Congratulations on the strong quarter and solid guidance here. Maybe if you could just give us some color on your confidence level with respect to hitting the upper or lower end of the 10% to 13% growth range, given all the policy and macro uncertainties we are seeing. Or in other words, what kind of macro and policy outcomes are you contemplating that could pull you towards either the bottom or top half of this range?
Hannon Armstrong
Well, I think the nature of guidance is that we expect to be in the range and there are a variety of factors that could push us towards the higher or lower end of the range. Policy items are just one of several. I don't think we point to any specific policy items or policy proposals that would have such a direct impact that we say, oh, if this is passed, we'll be at the high end of the range or anything quite that specific. but it's one of a number of factors that could lead us to ending up in the higher, the lower end of the range.
spk10
Okay. And then obviously a constructive growth outlook. And we are wondering if there was a particular asset class that you expect to outperform the rest of your portfolio and be the main driver of this growth, or perhaps an asset class that you're seeing more heavily represented in your potential pipeline.
Hinton Armstrong
Well, some of the sustainable infrastructure investments we could make, and they're typically in environmental restoration markets, but they could also be in ag and transport, not quite industry yet. And some of those should be potentially higher yielding, but they're still nascent markets with, you know, volumes still to build. And when they become significant and big components, we'll probably give them their own pipeline. But at this point, it's in sustainable infrastructure.
spk02
Got it. Thank you. Thank you.
Jeff
Our next questions come from the line of Chris Souther with B. Riley. Please proceed with your questions.
Chris Souther
Hey, guys. Thanks for taking my question here. Great to see the guidance raised. Could you talk a little bit about some of the moving pieces for 2022 between gain on sale versus net investment income? I guess in the middle of last year, you had kind of provided some ranges for those. So I just wanted to get a sense of where we're tracking relative to those. Obviously, the guidance implies positives across the board here, but I just wanted to get a sense of how we're thinking about kind of the mix in growth for 2022 and beyond, if you don't mind.
Hannon Armstrong
Sure, Chris. So we did not, as you noticed, put out the component parts of the EPS as part of our guidance. And as you mentioned, in the second quarter of last year, we put some at least ranges around those. I would say for 2022, You should expect both the distributable net investment income and the gain on sale to rise. This growth trajectory that we're guiding towards today is not overly based on either one of those. The portfolio will grow. We said the margins should remain relatively constant, so we'll have some NII growth, and we think we can continue to grow green on sale this year as well.
Chris Souther
Okay. Nice to see incremental deal with Clearway in Texas. Can you talk a little bit about some of the changes in the funding schedule of closed transaction? It looks like both 2022 and 2023 went up by similar amounts when you kind of back out the stuff that got funded in the fourth quarter. So it sounded like it was just one deal in one project in Texas, so that would be kind of funded more in one shot. Any color on that would be helpful, I think.
Hannon Armstrong
Well, I think that funding schedule is the aggregate of several transactions and several ins and outs. As you can see on the schedule next to it, in the quarter we funded $341 million from investments that had closed in prior quarters. So those essentially came out of that table. And then you can thereby assume that many new transactions went into that table. consistent pattern for us now to be closing deals that have fundings that occur a little bit into the future. And again, that creates good visibility on growth. So there wasn't just sort of one big story in that table. It's several ins and outs, including, as I mentioned in the prepared remarks, the completion of the NG portfolio fully coming out of that table now.
Chris Souther
Okay, got it. And just last one, the pipeline bump seems really broad-based here. Maybe you could just provide a bit more color on behind the meter, you know, kind of the mix between public sector, resi, you know, anything that you can kind of provide there I think would be great.
Hinton Armstrong
Chris, I think they're all growing. It's really hard to highlight one versus the other. I will say I'm always surprised when industrial energy efficiency projects happen and they're starting to happen because I have failed in my career to be successful with those, but they're starting to be successful. And I think the solar business continues to do a great job and has a great value proposition. So I can't give you a whole lot more detail other than to say they seem to all be growing.
Chris Souther
Okay. Thanks, guys.
Jeff
Thank you, Chris. Thank you. Our next questions come from the line of Philip Shen with Roth Capital Partners. Please proceed with your questions.
Chris
Hey, guys. Thanks for taking my questions. I'm juggling a couple calls today, so sorry if you addressed some of this, but just was wondering if you might be able to talk through by end market what the asset yields look like. I think on the last call, It sounded like some of the solar end markets were having some compression in the yield. Are you continuing to see that, you know, with, you know, it seems like PPA prices are going higher, so perhaps there's been a bit of a reversal. And then on the flip side, on the funding side, can you talk about, you know, with base rates going higher, Spread's also going higher with the overall macro risk from Ukraine and so forth. How do you expect your cost of funding to trend as well? Thanks.
Hinton Armstrong
When I take the first part, Jeff, you take the second. And hi, Phil. Nice to hear your voice again. The, you know, not surprisingly, the large grid-connected solar projects, Well, first of all, every project probably needs a higher PPA price just to recover the development fee or a portion of the development fee and to preserve returns with inflation and higher costs of capital. So I wouldn't equate higher PPA prices with ROEs going up because you need that to just cover the cost. you would expect the large grid connected solar projects to be the most competitive and bid up. Yields on distributed solar continue because it's relatively smaller to be more interesting for us.
Hannon Armstrong
And on the cost of funds, Phil, clearly the base rates are higher. As you mentioned, there's some volatility in the debt markets. So clearly we're at a place today, for instance, where Our debt that we issued last year would be trading at a discount, and our cost of funds would be a little bit higher. But I wouldn't, to part of your question, forecast where they go from here. I think that would be a challenging thing to do. But I would say, as I said in my prepared remarks, we're hyper-focused on margins. So we'll continue to invest at a margin to that cost of funds, whatever it may be. and we'll remain focused on the targeted ROE for the business.
Chris
Okay. Thanks for the color. As it relates to the green bonds, it looks like they're trading below par right now based on my quick check. What's your outlook for a new issuance of green bonds? Would you think that we might need to wait a bit before your next issuance there, or Do you think we could see something around the corner?
Hannon Armstrong
Well, I won't answer that specifically in terms of guiding to when we might issue debt, but I would just say that we're a business that is in a growth mode and you should expect us to be issuing debt. You should expect us to be issuing equity. You should be expecting us to use our $600 million credit facility that we put in place. We're not in a sort of wait and see mode of let's see where spreads go from here, and then maybe we'll invest, maybe we'll issue debt. I think we're a company that's going to ride the curve up and down. We have cash flow coming back all the time as well from the existing portfolio, and we're going to actively invest and actively issue debt.
Chris
Okay, great. Thanks for taking the questions, and nice report here. Thanks.
Jeff
Thank you. Our next questions come from the line of Julian Dumoulin-Smith. Please proceed with your questions.
Julian Dumoulin - Smith
Hi, guys. This is Anya filling in for Julian. So my first question is, with the NG deal now fully funded, is there potential to do further deals with them in the future? Or maybe more broadly asking that, how do you see the programmatic opportunity ahead? with any of your other partners? For instance, Sunrun, you had the Resi-Solar deal that you just signed last quarter.
Hinton Armstrong
Hi, Anya. This is Jeff Eckel. I would say we see the programmatic opportunity with Engie, Clearway, Sunrun, Sunpower, and not to exclude 36 other clients that we enjoy a programmatic relationship with, as strong. It's a mutually beneficial relationship, and there will be periods where we don't necessarily meet with our clients on individual transactions. But generally, once we acquire a client and have a relationship and work with them through some of the problems that are inevitable through all the asset management challenges, we tend to win more than we lose on the incremental business. So that's a very broad statement that we look forward to doing more business with all of those companies. Was there a second part of the question that I missed? Okay.
Julian Dumoulin - Smith
No, that was great. Thanks. And then second, I was just wondering if you could provide an update on the energy efficiency opportunity, just ongoing RFP activity on federal ESPCs and how that's progressing.
Hinton Armstrong
Good question. I think it's a variety of responses depending on the ESCOs. It certainly has been a little bit slower than the ESCOs like. And so, you know, it's not been great. There hasn't been an executive order. There's been an executive order but not setting a specific goal. And really the efficiency bureaucracy in the federal government really responds well to goals. So we'd like to see a specific dollar goal be raised, and that would really help. I mean, deals are still getting done, just it's not off the charts like you might have expected with a Biden administration versus a Trump administration.
Julian Dumoulin - Smith
Okay, great. That's fair. I'll jump back into it now.
Jeff
Thank you. Our next question has come from the line of Noah Kay with Oppenheimer. Please proceed with your questions.
Noah Kay
Hey, good afternoon. Thanks for taking the questions. We start with the sustainable infrastructure asset class. Again, the representation of that asset class in the pipeline is really striking. It was not a major part of funding, obviously, the last couple of years. What, in your view, maybe breaks the logjam, or is there anything in particular that really starts to open up that asset class for you this year? Anything that you would point to in terms of on-the-ground developments, policy changes as the world comes?
Hinton Armstrong
Hi, Noah. Thanks for the question. So, a couple things I'd point to. The state legislation around pay for success environmental outcome projects. We've been very active in the state of Maryland, which is the principal state surrounding the Chesapeake Bay, to accelerate using an ESPC-like structure. I believe that will be law in Maryland. It's Governor Hogan's number one legislative priority and enjoys really strong bipartisan support. So that's the kind of thing that if it passes and our clients start to do more projects, I think we'll get to see quite a bit more business. There's been a lot of activity in the ag business from sustainable farming to renewable natural gas that looks to be interesting and is growing quite well. So those would be a couple anecdotes.
Noah Kay
Great. Thanks. And, you know, the disclosure around the 40 programmatic partners, it's possible to provide comparison to past that'd be helpful. But I think the broader question is really about, you know, how you're growing an organization to serve those clients and perhaps also how you're expanding the ways in which you serve them. I'd be curious to get some color on that because obviously there's the support of the transaction itself, but then there's an ongoing relationship around those assets. So can you talk a little bit about kind of the expansion of your capabilities and the services you're providing and then how the number of partners may have grown over time?
Hinton Armstrong
Thank you for that question, Noah, because I was just kicking myself that we didn't include a slide on that. I think we've rounded over 100 people. And I think pre-pandemic, Jeff, we were below 60. So we've added quite a bit of talent. And I think the people we're seeing are terrific. And it's hard to hire people. So we've done a very good job in building out specialty skills that we need. We've also done a fantastic job, and I give Jeff Allen and his team credit on our technology build out. One of the things that makes our platform more scalable is using data. And our team is doing a great job. There's a tremendous amount still to do to build out our technology platform. But it is definitely happening here. And I'm always surprised at how much our team is using data in new and novel ways. I think the single most important thing we do to expand clients and expand relationships with clients is to zipper our organization from CEO to head of a business unit to investment teams to legal and portfolio management. We have a very rigorous way to track that. We make sure everybody's got a counterparty at the other side, and we get a lot of information that way. A lot of it is very supportive. I enjoy the calls I have with the CEOs of our clients, and we commiserate about industry issues, but they know a couple things about us. We understand their business, we appreciate how hard it is, and we will never, ever compete with them. Most financial services companies can't say that. Finally, we did make an organizational change as the portfolio got bigger and the complexity of our asset classes. We created an internal matrix organization. So there's somebody in charge of, let's say, Resi Solar on the investment team and portfolio management and then legal, so that we start to get economies of scale in doing transactions. We have feedback loops for additional investments for how things are actually performing. And it's definitely a, as the organization scales and the portfolio and AUM scale, we need a lot more business leaders. And I'm super excited about that rollout of that matrix. It's gone very well. We made a good slide. Thanks, Jack.
Noah Kay
Yeah. There's always next quarter, but I appreciate the color. And I think to ask one more clarifying question, if you don't mind, it's really around your comments on how duration of some of the investments may be shifting. So I just want to clarify, is that largely due to mix? And certainly if you take energy efficiency, it's shorter duration, right? So, yeah, please go ahead.
Hinton Armstrong
It's mix.
Noah Kay
Okay. Okay. And if you can give me a call to that, it's a mix of, say, more industrial energy efficiency.
Hinton Armstrong
Yeah, industrial energy efficiency projects might be 10 years, where a federal efficiency project is almost always 25. Right. Some of the stormwater remediation projects are five-, seven-year-type projects. Okay.
Noah Kay
Excellent. Thank you.
Hinton Armstrong
Thank you, Noah.
Jeff
Thank you. There are no further questions at this time. And with that, ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines at this time. Have a good day.
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