The SEC has been cautioning money managers not to mislead investors about the standards and methods they use for naming their funds as ESG
US Security and Exchange Commission Office. (Credit: Don Ramey Logan/Wikipedia)
The US Securities and Exchange Commission (SEC) is reportedly investigating Goldman Sachs Group’s asset-management division over its funds that invest based on environmental, social and governance (ESG) standards.
The investigation is focused on the investment bank’s mutual-funds business, which is a part of its asset-management arm.
SEC is looking at whether any of the investments for the funds are violating ESG metrics, differing from what is promised in marketing materials, reported Bloomberg.
In June 2020, Goldman Sachs renamed its BlueChip Fund as the ‘US Equity ESG Fund’ with Microsoft, Apple, and Alphabet as the top three holdings.
The fund’s other top holdings currently include Bristol-Myers Squibb, Eli Lilly & Co., and JPMorgan Chase & Co.
Last month, the US securities watchdog proposed a couple of rule changes to the claims related to ESG funds and ensure standardisation of such disclosures.
The proposals summarised how ESG funds should be marketed and how investment advisors should disclose their reasoning when labelling a fund, reported Reuters.
As the SEC hasn’t implemented the ESG rule changes, the probe may focus only on the investment practices of Goldman Sachs compared to what has been disclosed to its clients.
The SEC has been cautioning money managers not to mislead investors about the standards and methods they use for naming their funds as ESG.
Last month, the Bank of New York Mellon (BNY Mellon) has agreed to pay $1.5m to settle SEC claims over the false implication of some mutual funds that undergone an ESG quality review.
In addition, authorities in the US and Europe are checking for disclosure lapses and more-serious accusations of “greenwashing,” or overstating the ESG capabilities of companies.