According to US media, two funds of the US bank Goldman Sachs are the focus of new greenwashing investigations by the US Securities and Exchange Commission.
(Photo: Reuters)
Frankfurt The US Securities and Exchange Commission is expanding its investigations into so-called greenwashing cases. Two Goldman Sachs funds are the focus of investigators, as reported by US media. The Wall Street Journal reports that the blue chip fund, which Goldman renamed the US Equity ESG Fund in June 2020, is one of the blue chip equity funds.
The fund’s largest holdings, Microsoft, Apple and Alphabet, have remained the same. The fund is relatively small at $17.8 million. Neither Goldman nor the SEC commented when asked by Handelsblatt.
ESG stands for capital investment according to ecological, social and ethical standards. In the investment fund industry, which is driven by oversupply and pressure on margins, sustainable investing is a major topic for the future. Because this type of investment attracts more and more investment capital. According to the analysis company Morningstar, the assets in ESG funds worldwide have tripled to 2.8 trillion US dollars in the past three years.
No wonder that almost every fund house wants to appear as “green” as possible in its investment strategy. This could eventually open up the chance of new lucrative business. However, efforts to make a name for themselves here are being overshadowed by the debate that many providers may be exaggerating the information about their sustainable investments, i.e. they are greenwashing.
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According to the media report, it is still unclear whether the SEC investigation will lead to penalties for Goldman Sachs. But it’s another sign that the relatively unregulated mutual fund industry is preparing for tough times. The US Securities and Exchange Commission under Chief Gary Gensler had already set up a task force for greenwashing cases last year. According to industry insiders, it’s important to make investigations public to discourage other vendors.
Deutsche Bank fund subsidiary is also targeted by the SEC
An important case in this context is the investigation at the German fund company DWS, in which both the SEC and the German securities regulator Bafin and the US Department of Justice are involved. The Deutsche Bank fund subsidiary has had to face investigations by supervisory authorities on suspicion of greenwashing since last summer.
Former DWS sustainability boss Desiree Fixler had previously accused her former employer after her dismissal of systematically exaggerating information about his sustainable investments. DWS rejects the allegations.
At the beginning of June, the public prosecutor’s office, supported by the police and Bafin, carried out a raid on the corporate headquarters of DWS and Deutsche Bank in Frankfurt. According to a spokeswoman, the public prosecutor’s office is investigating, among other things, on suspicion of capital investment fraud. The investigation is directed “against unknown”.
A few hours after the raid on the night of June 2, DWS announced the resignation of DWS boss Asoka Wöhrmann. DWS shares have lost a good third of their value since the greenwashing allegations emerged at the end of August 2021.
>> Read also: Ex-Blackrock manager calls for ESG industry to be split up
Lawyers are gearing up for a slew of greenwashing cases. “Regulators don’t seem to allow a transition period for providers to adjust to the many new rules,” said Sonali Siriwardena, head of ESG practice at law firm Simmons & Simmons in London.
In practice, Europe started regulating ESG investing earlier than the US. For a good year now, all fund providers have had to assign their products to one of three groups: funds without ESG claims, funds with an ESG approach and those products that set specific sustainability goals. In addition, the EU uses its taxonomy to define certain economic activities as sustainable with regard to climate goals.
From August this year, investment advisors will also be required to ask their clients about their ESG interest by default, similar to what has long been the case with risk preferences. If you are interested, the advisor must have suitable investment proposals ready.
The SEC has now presented plans for stricter documentation requirements for ESG approaches. According to this, funds will have to show in future that their ESG strategies actually meet certain criteria.
More: How DWS faced awkward questions from its shareholders about ESG at its AGM