Is Northcore Capital an Impact Fund?

We perceive ourselves primarily as a credit fund but we invest with impact. Our thematic sectors and the businesses/projects we invest in satisfy at least one of the SFDR environmental goals, and our scientific sustainability framework ensures compliance with the additional SFDR requirements. However, our focus is on delivering strong returns for investors.

Why is sustainability perceived as delivering low returns?

The perception of low returns stems from green bonds and sustainability-linked notes (SLNs). A large influx of capital chasing a relatively small supply of green bonds has allowed companies to underpay for their risks in exchange for promises - many of which have gone unmet. SLNs introduced the notion that investors should reward companies for achieving their own sustainability projections. Imagine offering an oil company a rebate for meeting its oil production targets.

Any risk of greenwashing?

Our scientific metrics comprehensively address all environmental aspects of business operations, and the independence in data collection and measurement ensures there is no risk of greenwashing.

Do we reward companies for delivering on sustainability goals?

Financial markets already reward companies for achieving their business goals and projections. These rewards include higher valuations, increased customer loyalty, management premiums, and easier access to capital. Sustainable businesses are no different - they benefit from the same natural market incentives when they deliver on their commitments to investors and shareholders.

Why focus on only three sector themes?

Our three thematic sectors align with the environmental goals of the SFDR and represent significant capital needs for the foreseeable future. Additionally, these sectors meet our criteria for infrastructure-like investments, making them both impactful and consistent with our credit-focused strategy.

How difficult is it to collect the data needed for our scientific framework?

Sample collection (e.g., soil, water, air) is straightforward and handled by sending samples to laboratories. While the scientific and mathematical modeling is complex, it is fully managed by the labs. Results are automatically shared with all relevant stakeholders, ensuring a smooth process.

How often is environmental data collected?

Data is typically collected annually. However, in vulnerable areas, our scientific advisory team may recommend more frequent testing to ensure appropriate monitoring.

Who pays for the costs associated with the scientific framework?

The investee companies or the General Partner cover these costs, ensuring that our Limited Partners are not burdened with additional expenses.

Why would companies accept the additional covenants we require?

Financial covenants are widely accepted as quantitative benchmarks for measuring performance and accessing financial markets. Similarly, environmental covenants serve as benchmarks for establishing sustainability credentials, which help companies gain credibility and access to capital.

How do you help companies meet their environmental reporting requirements?

We work closely with portfolio companies to develop the necessary policies and systems for consistent data collection and storage. This ensures smooth and accurate reporting in line with environmental requirements.

Why aren’t major investors focused on SMEs?

One key reason is that capital is predominantly concentrated in the hands of large credit investors, and SME loans are typically too small relative to the size of these funds and their associated overhead costs. This mismatch creates a significant barrier for large investors when engaging with SMEs.

What happens if the investee company doesn't meet sustainability covenants?

If an investee company breaches sustainability covenants, we will provide a one-year grace period to allow them to remedy the breach, with semi-annual testing during this time. If the breach is not resolved within this period, the debt repayment may be accelerated.

Do we plan to co-invest with non-Article 9 funds?

Yes, as long as their approach does not conflict with our sustainability framework.