Goldman Sachs's asset manager faces SEC fine over ESG investments

Michael M. Santiago

The Securities and Exchange Commission on Tuesday has charged Goldman Sachs Asset Management, the asset manager of Goldman Sachs (NYSE:GS), for failing to follow its policies and procedures involving two mutual funds and one separately managed account strategy marketed as Environmental, Social, and Governance (“ESG”) investments.

GSAM agreed to settle the charges by paying a $4M penalty.

Based on the SEC’s orders, GSAM had several policies and procedures failures involving the ESG research that its investment teams used to select and monitor securities from April 2017 to February 2020.

And from April 2017 until June 2018, the company failed to disclose policies and procedures for ESG research in one product, and once policies and procedures were established, it failed to follow them consistently before February 2020, the order said.

When GSAM markets their funds as ESG, “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,” said Sanjay Wadhwa, deputy director of the SEC’s Division of Enforcement and head of its Climate and ESG Task Force.

The move comes as the SEC cracks down on firms that brand their ESG-focused funds and strategies. In June, Goldman Sachs came under SEC civil probe over ESG funds.