Golding Capital Partners has reclassified its private equity impact fund – for which it is currently raising capital – as Article 9 under the EU’s SFDR.
While it is not unusual for an impact fund to be classified as Article 9 – the highest sustainability disclosure standard in EU rules – it is more of a challenge for a fund of funds like Golding’s. This is because it makes commitments to managers based outside of the EU who have not submitted to EU disclosure standards.
Golding has worked with advisers to develop a system of gathering the requisite data from non-EU managers in an SFDR-compliant way, as reported earlier this year by New Private Markets, This allows the Europe-based fund of funds to attain Article 9 status, even if underlying managers do not.
The initiative, described by managing director and head of impact Andreas Nilsson as requiring “extensive understanding of regulation and really a profound process”, is designed to attract capital from EU investors who have stated a preference for Article 9 funds.
There has been a gradual change in the EU whereby regulation has become increasingly important to institutional investors’ allocation decisions, Nilsson told New Private Markets. “Regulation has become a key way to differentiate between different types of sustainable investing, and as a way to avoid greenwashing,” he said. “[The SFDR] has been around for a couple of years and people are getting used to it. It is here to stay.”
“We thought it important to meet investors on their level – on their terms – to make it easier for them to make allocation decisions,” he said.
According to Golding’s own research, only 30 percent of the private equity impact funds that it considers investable are classified as Article 9, because many are outside of the EU. The remaining 70 percent are “equally impactful” and have the same prospect of financial returns, said Nilsson, but for geographic reasons have not complied with EU regulation. By bringing these funds into Golding’s “shadow” Article 9 process, the firm hopes to open up new frontiers of manager selection and geographic diversification for EU investors with an Article 9 preference.
Golding is not aware of any other managers with a system to bring non-EU funds into an Article 9 compliant structure, but is prepared for others to follow suit. “I wouldn’t rule out that someone else would do it, but I think we are uniquely positioned as a front-runner; that’s what makes me excited that we are doing this,” said Nilsson.
Golding Impact 2021 is in fundraising mode, and the firm has decided to extend the fundraise period to the end of 2024 in a bid to allow investors to “digest” the new Article 9 status, said Nilsson. The firm held a first close on €65 million in September 2022.