SEC investigating Goldman Sachs for ESG claims

The US Securities and Exchange Commission is investigating Goldman Sachs’s asset management division over certain environmental, social and governance claims made by its funds, according to a source familiar with the matter.

The civil investigation is scrutinising certain Goldman Sachs funds with clean energy or ESG in their names, according to The Wall Street Journal, which first reported the investigation. Goldman rebranded its Blue Chip Fund as the US Equity ESG Fund in June 2020, the report said.

A person familiar with the situation confirmed the report. Additional details could not immediately be gleaned. Goldman Sachs declined to comment and the SEC did not respond to requests for comment.

The investigation marks the latest development in the SEC’s hunt for potential greenwashing. In 2021, the agency’s enforcement arm launched an ESG task force to investigate sustainability claims by investment managers and companies. In May, BNY Mellon became the first asset manager to settle with the agency for allegedly misleading investors about ESG claims.

The SEC alleged that BNY Mellon Investment Adviser suggested in documents that all investments in the funds had undergone an ESG quality review, even though that was not always the case. BNY Mellon, which paid a $1.5mn fine, said it updated its fund documents.

The BNY Mellon case was seen as the tip of the iceberg in the SEC’s ESG enforcement efforts. The agency had been investigating fund companies on ESG and some of those inquiries have been referred to the enforcement division, sources familiar with the matter have said.

“I think it is highly likely that . . . we will see more cases similar to the BNY Mellon case,” said Kristin Snyder, a former deputy director in the SEC’s examinations division who is now a partner at Debevoise & Plimpton. “I would expect to see additional cases before September 30”, when the SEC’s fiscal year ends, she added.

Authorities are also investigating DWS, Deutsche Bank’s asset management division, for possible greenwashing. Earlier this month, DWS chief executive Asoka Wöhrmann resigned hours after the company’s offices in Frankfurt were raided and evidence was seized by police investigating claims of greenwashing. DWS has denied wrongdoing.

The SEC also recently proposed rules determining what language a mutual fund can use to describe itself as environmentally friendly.