Golding Capital: ESG reporting will become ‘a line item in the fee structure’

The cost of ESG data reporting is one that will ultimately fall on LPs, according to Golding Capital Partners managing director Andreas Nilsson.

“They [GPs] need a lot of [ESG] reporting,” Nilsson said in a video interview at the Impact Investor Global Summit. “There’s no way around that. It’s partly to satisfy our demands, but also those of the regulators that are going to be intensifying even more. So I think reporting and data provision is a big thing.”

“I can imagine this being a new line item in the fee structure of leading private equity funds in this space, because it will actually take up a part of their resources,” he added.

Thus far, ESG data has largely been handled by “slightly stretched reporting departments at the GPs”. Going forward it is important to ensure that firms have teams working on ESG reporting full-time, but “that will require more funding in the end”.

There is an ongoing industry debate over where ESG data costs should lie, and it remains unclear if the cost of monitoring investments and reporting is part of the GP’s overhead – borne out of its management fee – or a fund expense passed on to the LPs over and above the management fee. Nilsson acknowledged that LPs footing the bill is “not standard” currently.

Golding Capital is a private markets fund investor with a dedicated impact strategy, and is currently working to make its non-EU fund investments align with EU SFDR Article 9 requirements. Its previous investments include a commitment to LightRock’s Climate Impact Fund, which closed in October last year, and to Quona Capital’s opportunities fund.