GSAM settles SEC greenwashing allegations

Goldman Sachs Asset Management is paying US$4 million to settle an alleged greenwashing case with the U.S. Securities and Exchange Commission (SEC).

The SEC charged GSAM with violations stemming from compliance failures involving two ESG mutual funds and a strategy for separately managed accounts.

The firm agreed to settle the allegations without admitting or denying the SEC’s findings. In settling, it agreed to a cease-and-desist order, a censure, and a US$4 million penalty.

Among other things, the SEC’s order found that GSAM either failed to have policies — or didn’t adhere to its own policies — involving the ESG research that it used to help select portfolio holdings.

“For example, the order finds that GSAM’s policies and procedures required its personnel to complete a questionnaire for every company it planned to include in each product’s investment portfolio prior to the selection; however, personnel completed many of the ESG questionnaires after securities were already selected for inclusion and relied on previous ESG research, which was often conducted in a different manner than what was required in its policies and procedures,” the regulator said.

“In response to investor demand, advisers like Goldman Sachs Asset Management are increasingly branding and marketing their funds and strategies as ‘ESG,’” said Sanjay Wadhwa, deputy director of the SEC’s division of enforcement and head of its climate and ESG task force, in a release.

“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,” he added.

“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,” said Andrew Dean, co-chief of the enforcement division’s asset management unit.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.