As portfolio manager (AIFM) and investment adviser we take ESG factors into account in our investment and investment advisory process, as these may have substantial negative effects on the value of an investment (‘sustainability risks’). Furthermore, we take into consideration the effects of potential sustainability risks on net assets, financial position and results of operations as well as on the reputation of our group of companies and the funds we manage and advise. This is why our approach consists of several steps.
We are aware that our impact on our investments is determined by the particular characteristics of the investment. With co-investments, there is a wider ability to have an impact than with fund investments, as in the latter an additional target fund manager participates in the process between the funds administered and advised by us and a particular portfolio company or project. When acting as a fund-of-funds manager, we can generally not rely on having received all relevant information pertaining to sustainability risks in a particular portfolio company or project at the time of our investment decision/recommendation. If we do not have this information, we cannot assume that we are able to properly take sustainability risks into consideration in the context of a fund investment.
With fund investments or investment advisory processes, we predominantly evaluate the ESG approach of the target fund manager in the due diligence phase. We evaluate the extent to which the target fund manager displays a dedication to responsible investment and integrates sustainability risks into its investment decision process and factor this evaluation into our own investment decision/recommendation. Throughout the holding period of the investment (the monitoring phase), we aim to receive data from the target fund manager in regard to the performance of both the target fund itself and the individual portfolio companies/projects. On this basis, we can identify improvement potential and discuss this with the target fund manager, aiming at a proper consideration of sustainability risks on the part of the target fund and thus indirectly of our investments.
We use the same standards to evaluate the ESG approach of the main investor in the due diligence phase of co-investments. We also analyse available information on the ESG performance of the respective portfolio company/project and factor this into our investment decision/recommendation. Throughout the holding period of the co-investment, we cooperate with the main investor to compile improvement potential for the ESG performance of the respective portfolio companies/projects.
The same applies to all investment types: we reserve the right to turn down an investment if information on the proper consideration of sustainability risks in the respective investment process is unavailable, insufficient or if the ESG performance does not meet our standards.
Although we consider sustainability risks in our investment process, the majority of funds we manage do not at present promote any ecological and/or social characteristics. Neither do they have any sustainable investments as a goal within the meaning of the European Parliament’s regulation on sustainability-related disclosure in the financial services sector (SFDR).
In addition, selected funds promote environmental and/or social characteristics and/or target sustainable investments as defined according to the SFDR. Specifically, these funds are: Golding Impact 2021 SCS SICAV-FIAR, Golding Infrastructure 2022 SCS SICAV-FIAR Subfund A and Subfund B, Golding Infrastructure 2022 Feeder FCP-FIAR Subfund A and B, Golding Infrastructure Co-Investment 2023 SCS SICAV-FIAR, Golding Buyout Co-Investment 2023 SCS SICAV-FIAR as well as Golding Impact 2021 Feeder FCP-FIAR. Further transparency disclosures required under Article 10 of Regulation (EU) 2019/2088 on sustainability-related disclosures in the financial services sector (“SFDR”) and Articles 24-36 as well as Articles 37-49 of Commission Delegated Regulation (EU) 2022/1288 (SFDR Level 2) respectively can be found here.
Golding Capital Partners (Luxembourg) S.à r.l. as portfolio manager (AIFM) and Golding Capital Partners GmbH as financial (investment) adviser in terms of the European Sustainable Finance Disclosure Regulation (SFDR) (together in the following “Golding” or “we”) take ESG factors into account in our investment and investment advisory process, as these may have substantial negative effects on the value of an investment (‘sustainability risks’).
We consider the impact of our investment decisions on ESG concerns alongside human rights and the fight against corruption and bribery (the principle adverse impacts or PAI) in our investment/investment advisory process.
We are also aware that the amount of information available to us before making an investment decision/recommendation significantly depends on the investment type. Whereas with co-investments the most important adverse impacts on sustainability and sustainability factors can generally be determined early on, with fund investments the specific portfolio companies and projects of a target fund are in many cases not yet known at the time of our investment decision/recommendation. If we do not have such information, we cannot assume that we properly consider the most important adverse impacts on sustainability of our investment decisions/recommendations on sustainability factors.
Independent of the investment type, we gather information by appropriate means in the due diligence phase. When acting as a fund-of-funds manager or advising on such a fund, we also assess the approach of the target fund manager and evaluate how it prioritises and identifies the essential adverse impacts.
The adverse impacts on sustainability can, depending on the asset class of our investments as well as the industries and sectors of the portfolio companies and projects, be very diverse. The same naturally applies to the measures we take in individual cases.
In the interest of responsible corporate governance, we have therefore established and refined the ‘rules of conduct’ for financial service providers in the guidelines and processes of our organisation handbook (“Code of Conduct“).
Golding’s employee count, neither in its role as financial market participant nor as financial advisor nor consolidated, exceeds 500, therefore there is no legal requirement to consider principal adverse impacts of investment decisions on sustainability factors.
As a consequence, Golding in its roles as financial market participant and financial advisor has chosen for the time being not to consider PAIs of investment decisions on sustainability factors at the entity level, after having taken into consideration the following points:
- with regard to fund investments, the specific portfolio companies and projects of a target fund are in many cases not yet known at the time of our investment decision/recommendation;
- the amount of information available to us before making an investment decision/recommendation significantly depends on the investment type;
- the ongoing regulatory developments and clarifications from the European Supervisory Authorities as well as the European Commission in 2022 and the anticipated updates regarding PAIs for the year 2023.
Golding will periodically reassess the decision to consider principal adverse impacts at entity level based on evolving market practice, regulatory guidance and data availability as well as quality.
In our role as financial market participant we consider for selected financial products (i.e. alternative investment funds) principal adverse impacts at the product level. Regarding those financial products the relevant results will be disclosed pursuant to Article 11 (2) SFDR in the respective annual report.
As an alternative investment fund manager (AIFM) and investment adviser, we have arranged appropriate remuneration systems, which, along with other goals, are intended to promote robust and effective risk management in relation to (sustainability) risks. As such, our remuneration structure should not favour any excessive tolerance for (sustainability) risks incompatible with the established investment strategy of the funds we manage and linked to a risk-weighted performance.
To achieve these goals, we have developed a transparent remuneration policy based on the market standard which extends to the various specialist areas, functions and levels of responsibility while considering regulatory requirements.
Our employees receive fixed remuneration for their work high enough to compensate professional services corresponding to capacities, tasks and responsibilities, expertise and skills, professional experience and seniority, taking into account the relevant specialist area and region. To this extent, we ensure that our employees are not significantly dependent on variable remuneration and therefore are not incentivised to take disproportionately high (sustainability) risks or to not properly take the latter into consideration.
In addition to fixed remuneration, our employees can receive variable remuneration in the form of royalties and bonus payments. Along with other prerequisites, we take into consideration a multi-year assessment and the meeting of previously agreed targets. Depending on the specialist area and function, as well as on the responsibility level, targets may also include the proper consideration of sustainability risks.
Variable remuneration may be granted in a short-term component paid out immediately after it is granted, and in a long-term component, payment of which is deferred (long-term). Our goal in this is to reward employees for the sustainability of the long-term results of decisions made in the past.
Finally, selected employees, known as risk bearers, who can have an important influence on the risk profile of the company and the managed and advised funds, may be awarded variable remuneration in the form of a performance-related profit share, taking into account a multi-year assessment (‘carried interest’). This remuneration is dependent on the investment success of the particular fund and only comes into effect if the fund’s investors have realised gains above a defined minimum return. The prerequisite for this is that the employee participates to a substantial degree with a contribution to the respective fund. This ensures that investors’ and employees’ interests are in alignment and that (sustainability) risks are properly taken into account by the respective risk bearer.
In our investment and investment advisory process, we evaluate, measure and monitor the sustainability risks for our investments both before and after the investment decision/recommendation. To do this, we have developed an exact evaluation methodology and our own ESG analysis tool.
The ESG analysis tool enables us to carry out an objective assessment of target fund manager’s ESG approach and the consideration of sustainability risks in the investment decision process of the respective fund manager as well as potential sustainability risks on the portfolio company or project scale, regardless of which employee carries out the evaluation. In this way, we can compare and continuously monitor the ESG performance of our investments even across the various investment classes.
Our initial assessment is based on all publicly available information and the information generally provided by the respective target fund manager or principal investor of a co-investment as part of the due diligence. We obtain additional information via an ESG questionnaire we have developed, which classifies the consideration of sustainability risks in the respective investment decision process into five categories: ESG values, ESG organisation, ESG due diligence, ESG ownership and ESG reporting.
Based on the information and responses we receive from a target fund manager or the principal investor of a co-investment, we clarify any follow-up questions necessary and evaluate all information via our ESG analysis tool.
The standardised results of our ESG evaluation, as well as intersegmental benchmarking with a particular comparison group, are an integral component of our investment template and therefore the basis of our investment decision.
We reserve the right to turn down an investment if information on the proper consideration of sustainability risks in the respective investment process is unavailable, insufficient or if the ESG performance does not meet our standards.