SEC investigates Goldman Sachs over ESG allegations

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

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

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 over ESG claims.

The SEC alleged that BNY Mellon Investment Adviser had suggested in documents that all investments in the funds had undergone an ESG quality review, although this was not always the case. BNY Mellon, which paid a $1.5 million 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 was investigating fund companies on ESG and some of those investigations were referred to the enforcement division, people familiar with the matter said.

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

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

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

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