The Securities and Exchange Commission today charged Goldman Sachs Asset Management, L.P. (GSAM) for policies and procedures failures involving two mutual funds and one separately managed account strategy marketed as Environmental, Social, and Governance ( aka, ESG) investments.
To make the charges go away, GSAM agreed to pay a $4 million penalty. AutoInformed notes with no insider knowledge of this matter whatsoever or holdings of Goldman products to the best of its knowledge, that this is a minor parking ticket. Could it be that the SEC was perhaps lagging in its regulatory duties under the previous administration, and is now using this as a public relations ploy as it plays catch-up monitoring such investments?
GSAM consented to the entry of the SEC’s order finding that it violated Section 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-7. Without admitting or denying the SEC’s findings, GSAM agreed to a cease-and-desist order, a censure, and the $4 million penalty.
The SEC’s order says that from April 2017 until February 2020, GSAM had several policies and procedures failures involving the ESG research its investment teams used to select and monitor securities. From April 2017 until June 2018, GSAM also failed to have any written policies and procedures for ESG research in one product.
Moreover, once policies and procedures were established, it failed to follow them consistently prior to February 2020. The SEC said “for example 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. 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.”
“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.
“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,” Wadhwa concluded.
A statement provided by GSAM said it “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. As the order notes, the Goldman Sachs Asset Management Fundamental Equity group had conducted ESG research on the issuers held in each of those portfolios. And, as of February 2020, the Goldman Sachs Asset Management Fundamental Equity group had completed the ESG questionnaires provided by its policies and procedures for the issuers held in those portfolios.”
“Today’s action reinforces that investment advisers must develop and adhere to their policies and procedures over their investment processes, including ESG research, to ensure investors receive the advisory services they would expect to receive from an ESG investment,” said Andrew Dean, Co-Chief of the Enforcement Division’s Asset Management Unit.
We will give the last word to Goldman:
“These historical matters did not materially impact the investments’ satisfaction of the ESG criteria contained in those policies and procedures. This matter related to the Goldman Sachs ESG Emerging Markets Equity Fund, Goldman Sachs International Equity ESG Fund and a US Equity ESG separately-managed account strategy. Goldman Sachs Asset Management is committed to its pursuit of best practices across its portfolios for sustainable, long-term value creation that helps its clients meet their investing needs.”
About Ken Zino
Ken Zino, editor and publisher of AutoInformed, is a versatile auto industry participant with global experience spanning decades in print and broadcast journalism, as well as social media. He has automobile testing, marketing, public relations and communications experience. He is past president of The International Motor Press Assn, the Detroit Press Club, founding member and first President of the Automotive Press Assn. He is a member of APA, IMPA and the Midwest Automotive Press Assn.
He also brings an historical perspective while citing their contemporary relevance of the work of legendary auto writers such as Ken Purdy, Jim Dunne or Jerry Flint, or writers such as Red Smith, Mark Twain, Thomas Jefferson – all to bring perspective to a chaotic automotive universe.
Above all, decades after he first drove a car, Zino still revels in the sound of the exhaust as the throttle is blipped during a downshift and the driver’s rush that occurs when the entry, apex and exit points of a turn are smoothly and swiftly crossed. It’s the beginning of a perfect lap.
AutoInformed has an editorial philosophy that loves transportation machines of all kinds while promoting critical thinking about the future use of cars and trucks.
Zino builds AutoInformed from his background in automotive journalism starting at Hearst Publishing in New York City on Motor and MotorTech Magazines and car testing where he reviewed hundreds of vehicles in his decade-long stint as the Detroit Bureau Chief of Road & Track magazine. Zino has also worked in Europe, and Asia – now the largest automotive market in the world with China at its center.
SEC Charges Goldman Sachs for Ignoring ESG Investment Policies, Procedures
The Securities and Exchange Commission today charged Goldman Sachs Asset Management, L.P. (GSAM) for policies and procedures failures involving two mutual funds and one separately managed account strategy marketed as Environmental, Social, and Governance ( aka, ESG) investments.
To make the charges go away, GSAM agreed to pay a $4 million penalty. AutoInformed notes with no insider knowledge of this matter whatsoever or holdings of Goldman products to the best of its knowledge, that this is a minor parking ticket. Could it be that the SEC was perhaps lagging in its regulatory duties under the previous administration, and is now using this as a public relations ploy as it plays catch-up monitoring such investments?
GSAM consented to the entry of the SEC’s order finding that it violated Section 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-7. Without admitting or denying the SEC’s findings, GSAM agreed to a cease-and-desist order, a censure, and the $4 million penalty.
The SEC’s order says that from April 2017 until February 2020, GSAM had several policies and procedures failures involving the ESG research its investment teams used to select and monitor securities. From April 2017 until June 2018, GSAM also failed to have any written policies and procedures for ESG research in one product.
Moreover, once policies and procedures were established, it failed to follow them consistently prior to February 2020. The SEC said “for example 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. 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.”
“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.
“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,” Wadhwa concluded.
A statement provided by GSAM said it “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. As the order notes, the Goldman Sachs Asset Management Fundamental Equity group had conducted ESG research on the issuers held in each of those portfolios. And, as of February 2020, the Goldman Sachs Asset Management Fundamental Equity group had completed the ESG questionnaires provided by its policies and procedures for the issuers held in those portfolios.”
“Today’s action reinforces that investment advisers must develop and adhere to their policies and procedures over their investment processes, including ESG research, to ensure investors receive the advisory services they would expect to receive from an ESG investment,” said Andrew Dean, Co-Chief of the Enforcement Division’s Asset Management Unit.
We will give the last word to Goldman:
“These historical matters did not materially impact the investments’ satisfaction of the ESG criteria contained in those policies and procedures. This matter related to the Goldman Sachs ESG Emerging Markets Equity Fund, Goldman Sachs International Equity ESG Fund and a US Equity ESG separately-managed account strategy. Goldman Sachs Asset Management is committed to its pursuit of best practices across its portfolios for sustainable, long-term value creation that helps its clients meet their investing needs.”
About Ken Zino
Ken Zino, editor and publisher of AutoInformed, is a versatile auto industry participant with global experience spanning decades in print and broadcast journalism, as well as social media. He has automobile testing, marketing, public relations and communications experience. He is past president of The International Motor Press Assn, the Detroit Press Club, founding member and first President of the Automotive Press Assn. He is a member of APA, IMPA and the Midwest Automotive Press Assn. He also brings an historical perspective while citing their contemporary relevance of the work of legendary auto writers such as Ken Purdy, Jim Dunne or Jerry Flint, or writers such as Red Smith, Mark Twain, Thomas Jefferson – all to bring perspective to a chaotic automotive universe. Above all, decades after he first drove a car, Zino still revels in the sound of the exhaust as the throttle is blipped during a downshift and the driver’s rush that occurs when the entry, apex and exit points of a turn are smoothly and swiftly crossed. It’s the beginning of a perfect lap. AutoInformed has an editorial philosophy that loves transportation machines of all kinds while promoting critical thinking about the future use of cars and trucks. Zino builds AutoInformed from his background in automotive journalism starting at Hearst Publishing in New York City on Motor and MotorTech Magazines and car testing where he reviewed hundreds of vehicles in his decade-long stint as the Detroit Bureau Chief of Road & Track magazine. Zino has also worked in Europe, and Asia – now the largest automotive market in the world with China at its center.