Golding Capital Partners, the private markets fund investor with a dedicated impact strategy, is working with PwC in a bid to make its non-EU fund investments align with EU SFDR Article 9 requirements.
Golding’s inaugural impact fund, which has raised €65 million as of a first close last year, is initially classified as “Article 8-plus”, Andreas Nilsson, managing director and head of impact, told New Private Markets. In order to classify a fund as Article 9 – the greenest of EU classifications – funds must have sustainability as their objective and meet various ongoing reporting requirements for their underlying investments.
Golding has not opted for Article 9 at the outset because it invests in emerging markets and North American funds as well as in European ones. “For those funds, many of them are just not classified, even if they are leading, experienced fund managers that have been around for 10 or 15 years, developing the very concept of impact investing in their regions,” Nilsson said. They have the necessary data “but maybe their investor base does not yet require it”.
Golding is currently “working very hard internally” to create a “shadow Article 9”, whereby the firm can collect the requisite data from its non-EU GPs and classify an investment as conforming with Article 9 without the GP having to do so itself.
“The data can then be audited and hopefully we can then make our fund of funds an Article 9 fund in the end as well,” Nilsson said.
The process involves more than simply getting the right data from non-EU managers, said Nilsson; “it’s how we then convert that and monitor it over time. It isn’t a one-off process. We have done a massive exercise including PwC”.
That said, gathering the data is a significant part of the process. “Putting that in our side letters agreement: that this is what we will be needing, the frequency… do no significant harm, principal adverse impacts as well as other data.”
“It’s quite a lot, and there is an educational process whereby we will help a fund manager in, say, India to conform with this,” Nilsson said. “But they are happy because it opens up new pockets of capital for them.”
The quest for Article 9 status is about attracting certain investors, rather than materially changing Golding’s investment approach, Nilsson said. “I don’t personally think Article 9 is very important, because I know the work we do in parallel using our impact pathway [Golding’s in-house impact assessment method] captures the impact much more than Article 9.
“But many mainstream investors – pension funds, insurance companies – that are less involved or less experienced with impact, attach a certain signalling value to it. So it is more of a box to tick for us,” he said.
Golding has committed capital to LightRock’s Climate Impact Fund, which closed in October last year, and to Quona Capital‘s third flagship fund, which closed in September last year. It is lining up further commitments to funds in the US buyout space, the food and agtech space and early stage climate investing.
Editor’s note: This article has been updated to reflect that PwC is acting as an advisor to the process, not as auditor.