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Greenwashing enforcement

Author: Dr. Angelika Hellweger  7 December 2022
2 min read

Angelika Hellweger of Rahman Ravelli details the action brought against Goldman Sachs by the US Securities and Exchange Commission – and the issues it raises.

Goldman Sachs is just the latest asset management division to come under scrutiny from the US Securities and Exchange Commission (SEC) for alleged greenwashing.

The SEC has alleged that Goldman Sachs failed to implement and follow policies and procedures for some of its ESG (environmental, social and governance) funds between 2017 and 2020.

Goldman's compliance policy said that investment analysts would use a questionnaire to screen investments before adding them to funds or other portfolios. Yet, according to the SEC, “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.’’ Furthermore, there were not actually any written ESG policies and procedures in place at Goldman Sachs in 2017 and 2018.

Goldman Sachs Asset Management (GSAM) has agreed to pay a $4 million penalty to settle the charges, without admitting or denying the SEC’s findings. It remains to be seen whether the fine will have a deterrent effect on a firm the size of Goldman Sachs.

The same question could be asked about the $1.5 million penalty that BNY Mellon Investment Adviser agreed to pay in May. It paid this to settle allegations of misstatements and omissions regarding its ESG considerations when making investment decisions for certain mutual funds that it managed.


Growing consumer interest in ESG and sustainability - as well as the fact that using the broad term ESG is now associated with trillions of dollars of business - has incentivised companies to promote their green credentials, in terms of their working methods and / or their products.

Statements made by asset managers regarding the ESG or sustainability criteria used in a particular fund or in the firm’s investment process are often overstated or misleading. Roger Barker, director of policy and corporate governance at the UK’s Institute of Directors, has highlighted what he called the “huge amount of subjectivity” that is being used when it comes to creating ESG ratings.

The methodology being used, the quality of data being compiled and relied on, and the frameworks and key performance indicators (also known as key metrics) being utilised are not providing transparency and consistency. This means that they may offer little or no credibility to any ESG claims being made.

The often “misleading” promotion of green credentials has triggered both the action of lawmakers and enforcement authorities. Lawmakers and regulators in the US, UK and European Union are aiming for greater market transparency and the creation of labels and disclosure rules for ESG and sustainability-themed funds. At the same time, authorities are strengthening their enforcement activities, resulting in asset managers being penalised for false or misleading ESG claims.

For this reason alone, companies that market their funds and strategies with an ESG angle are well advised to establish reasonable policies and procedures to govern how such factors will be analysed and evaluated as part of the investment process. And if such policies and procedures are devised and introduced, they have to be maintained and adhered to at all times.

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Dr. Angelika Hellweger

Legal Director

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Angelika is a specialist in international, high-level economic crime investigations and large-scale commercial disputes. She has widely-recognised expertise in representing corporates and conglomerates in Europe, the Middle East, Africa and United States.

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