Whereas: In an increasingly complex global marketplace, the ability to draw on a wide range of viewpoints, backgrounds, skills, and experience is critical to company success;

The Proponent believes that diversity in senior management helps ensure that different perspectives are applied to decisions, while enhancing the likelihood that proposed solutions will be nuanced and comprehensive;

Hannon Armstrong’s senior executives appear to be entirely white and primarily male. Of the staff currently listed as “Senior Management Team” on the company’s website, there are no women nor individuals who appear Black, Latinx, or Indigenous. In the company’s separate “Leadership Team,” twelve staff are listed including the Senior Management Team. Two on this expanded list are women, but again none appear to be racially or ethnically diverse;

As a values-driven company, Hannon Armstrong is dedicated to improving the globe’s climate future. Given the “deep links between racism and climate change” (Yale School of the Environment) and the company’s firm stance on racial justice – “Hannon Armstrong stands with our black employees and the black community in the fight against systemic racism” – the makeup of the management team is particularly concerning;

Research shows that diversity in company management has numerous positive effects for the company and shareholders. McKinsey Research found that “[f]or diverse companies, the likelihood of outperforming industry peers on profitability has increased over time, while the penalties are getting steeper for those lacking diversity”;

McKinsey’s analysis found that “companies in the top quartile of gender diversity on executive teams were 25 percent more likely to experience above-average profitability than peer companies in the fourth quartile … [and] … that the higher the representation, the higher the likelihood of outperformance. Companies with more than 30 percent women on their executive teams are significantly more likely to outperform those with between 10 and 30 percent women, and these companies in turn are more likely to outperform those with fewer or no women executives. As a result, there is a substantial performance differential—48 percent—between the most and least gender-diverse companies”;

Similarly, McKinsey found a 36% difference in likelihood of outperformance between 1st vs 4th quartile of companies ethnically diverse executive teams;

Shareholders are concerned that Hannon Armstrong’s lack of diversity in the senior management and leadership teams may be adversely affecting shareholder value and believe that adding diversity in senior level management as a clear metric in our CEO’s compensation package creates an incentive to strive for excellence in this area just as our financial metrics incentivize performance.

RESOLVED: Shareholders request that the Board or its Compensation Committee prepare a report evaluating the benefits and drawbacks of including metrics regarding diversity among the Senior Management Team as one of the performance measures for the CEO under the Company’s annual and/or long-term incentive plans.  For the purposes of this proposal, “diversity” is defined as gender, racial, and ethnic diversity.

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