The U.S. Securities and Exchange Commission (SEC) announced today that it has charged Goldman Sachs’ asset management division for failing to implement and follow policies and procedures for some of its ESG funds.
Goldman Sachs Asset Management (GSAM) has agreed to pay a $4 million penalty to settle the charges, without admitting or denying the SEC findings.
Andrew Dean, Co-Chief of the SEC’s Enforcement Division’s Asset Management Unit, said:
“Today’s action reinforces that investment advisers must develop and adhere to their policies and procedures over their investment processes, including ESG research, to ensure investors receive the advisory services they would expect to receive from an ESG investment.”
The charges relate to policy and procedure failures between 2017 and 2020 in three ESG-themed GSAM portfolios, the Goldman Sachs ESG Emerging Markets Equity Fund, Goldman Sachs International Equity ESG Fund and a US Equity ESG separately-managed account strategy. According to an SEC investigation into the funds, the failures included not having written policies in place for ESG research, and then failing to follow the policies once they were established.
The charges come as regulators around the world, are ramping efforts to fight greenwashing, in which the claims made by asset mangers regarding the ESG or sustainability criteria used in a fund or firm’s investment process is overstated or misleading. Earlier this year, the SEC announced that it had charged BNY Mellon Investment Adviser for misstatements about the ESG considerations used in some of its mutual funds, and Deutsche Bank’s investment arm DWS’ CEO resigned a day after police raided the firms’ Frankfurt offices as part of an investigation into greenwashing allegations at the firm.
Sanjay Wadhwa, Deputy Director of the SEC’s Division of Enforcement and head of its Climate and ESG Task Force, said:
“In response to investor demand, advisers like Goldman Sachs Asset Management are increasingly branding and marketing their funds and strategies as ‘ESG.’ When they do, they must establish reasonable policies and procedures governing how the ESG factors will be evaluated as part of the investment process, and then follow those policies and procedures, to avoid providing investors with information about these products that differs from their practices.”
Following the SEC announcement, Goldman Sachs released a statement, saying that GSAM “is pleased to have resolved this matter, which addressed historical policies and procedures related to three of the Goldman Sachs Asset Management Fundamental Equity group’s investment portfolios.”
The firm added:
“Goldman Sachs Asset Management is committed to its pursuit of best practices across its portfolios for sustainable, long-term value creation that helps its clients meet their investing needs.”