Dive Brief:
- The Securities and Exchange Commission (SEC) fined Goldman Sachs $4 million over the investment bank’s failure to follow environmental, social and governance (ESG) policies and procedures, the regulator announced Tuesday.
- The bank’s asset-management unit “had several policies and procedures failures involving the ESG research its investment teams used to select and monitor securities,” the SEC said.
- The bank’s alleged misconduct took place from April 2017 to June 2018, the SEC said. Goldman, which neither admitted or denied the SEC's findings, agreed to a cease-and-desist order and a censure in addition to the monetary penalty, according to the regulator.
Dive Insight:
Goldman’s fine is more than double the ESG-related penalty the SEC levied on the bank’s peer, BNY Mellon, in May.
BNY Mellon agreed to pay $1.5 million after the regulator found the bank’s investment adviser division misstated how it applied ESG criteria when making investment decisions for some of its mutual funds.
The SEC said Goldman Sachs’ asset-management unit, between April 2017 and June 2018, failed to implement written policies and procedures for ESG research in one product, the SEC said. Once policies and procedures were established, the bank failed to follow them consistently prior to February 2020, the regulator added.
Goldman, in a statement Tuesday, said the matter related to the bank’s ESG Emerging Markets Equity Fund, Goldman Sachs International Equity ESG Fund and a US Equity ESG separately managed account strategy.
“Goldman Sachs Asset Management, L.P. 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 bank said in a statement Tuesday.
The SEC claims the bank had employees complete a questionnaire for every company it planned to include in each product’s investment portfolio prior to the selection. The bank’s staff, however, completed many of the ESG questionnaires after securities were already picked for inclusion and relied on previous ESG research. That research, the SEC said, was often conducted in a different manner than what was required in the bank’s policies and procedures.
“In response to investor demand, advisers like Goldman Sachs Asset Management are increasingly branding and marketing their funds and strategies as ‘ESG,’” Sanjay Wadhwa, deputy director of the SEC’s Division of Enforcement and head of its Climate and ESG Task Force, said in a statement. “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.”
