Goldman Sachs Under Investigation by SEC Over ESG Funds

Did The Firm Misrepresent Environmental, Social, and Governance Qualifications in Marketing Materials? 

According to The Wall Street Journal, sources say that The US Securities and Exchange Commission (SEC) is investigating Goldman Sachs Group Inc. The investigation includes  certain funds that utilize environmental, social, and governance (ESG) criteria. ESG investing considers these three factors when assessing an investment’s overall impact and financial returns. 

Goldman Sachs’s mutual fund business oversees at least four funds with ESG or clean energy in their names. The SEC is reportedly examining these investments in terms of their environmental, social, and governance criteria and metrics that marketing materials tout them to have.  

Some Asset Management Firms May Be “Greenwashing” ESG Investments to Investors 

While the Commission has not implemented any rules governing ESG requirements, the regulator has cautioned money managers against misleading investors. This is regarding the criteria used to determine whether the fund meets ESG requirements. In 2021, the Commission released a report which found the funds that are supposedly ESG but are not taking enough action to ensure that marketing materials are accurate. 

In May 2022, the SEC sent out rulemaking proposals related to new environmental, social, and governance risk disclosure plans for investments and advisors. Meanwhile, authorities examined how firms package and market ESG investments. Which includes the event of possible disclosure lapses or “greenwashing,” which would involve overstating ESG-related capabilities.  

BNY Mellon Fined $1.5M by the SEC Over Purported ESG Quality Review Inaccuracies 

Last month, the Commission announced that Bank of New York Mellon Corp. had consented to pay $1.5M to resolve allegations that it falsely implied certain mutual funds had gone through an ESG quality review. According to investigators, despite telling investors otherwise, from July 2018 through September 2021, the firm’s asset management unit allegedly failed to examine the ESG criteria used to assess funds closely. 

Also, certain investments were allegedly missing a quality score review. For example, 67 of the 185 investments in one BNY Mellon fund purportedly lacked an ESG-quality score when the security was bought. The firm settled without denying or admitting to the SEC charges. 

According to Nerd Wallet, the 2020 trends report from the US SIF Foundation noted that US assets under management informed by ESG strategies grew to $171.1 trillion at the start of that year. That figure was just $12 trillion at the beginning of 2018. 

What Are the Potential Risks Involving ESG Funds?  

According to seasoned investment lawyers, investors may not be aware of the risks involved in ESG investing:

  • Sensitive to interest-rate changes.
  • More heavily exposed to fluctuation in oil prices than the S&P 500.
  • Greater overall volatility—according to the WSJ, in 2021, the average volatility of ESG funds was 15.46% yearly. 
  • Single-stock risk. The WSJ reported that in one out of every 10 ESG funds it examined, the largest holding fund weighted 10% or greater. 

Experienced ESG Investment Lawyers 

If you have suffered significant losses in an ESG Fund and are wondering whether your broker-dealer failed to fully apprise you of the risks or misrepresented funds claiming they satisfied environmental, social, and governance (ESG) criteria. You may have grounds for pursuing damages, which is why we recommend getting in touch with our seasoned investment lawyers. 

Our knowledgeable ESG Fund attorneys represent clients throughout the United States.

For over 30 years, Shepherd Smith Edwards and Kantas (SSEK Law Firm at has been fighting for investors, and we have helped thousands to recoup their losses caused by broker negligence or misconduct. 

Contact SSEK Law Firm for a free consultation with our expert investment lawyers or call us (800) 259-9010 today.

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