From April 2017 until February 2020, GSAM’s fundamental equity group did not implement policies and procedures reasonably designed to prevent violations of the federal securities laws concerning the investment process, according to an SEC order.
The funds in question are U.S. Equity ESG Strategy, Goldman Sachs International Equity ESG Fund and Goldman Sachs ESG Emerging Markets Equity Fund, the order noted.
Of note, from April 2017 until June 2018, the company failed to have any written policies and procedures for ESG research for its U.S. Equity ESG Strategy, and once policies and procedures were established, it failed to follow them consistently prior to February 2020, the SEC said.
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 SEC said. GSAM shared information about its policies and procedures, which it failed to follow consistently, with third parties, including intermediaries and the funds’ board of trustees, the SEC added.
“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 news 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.”