Imagine you invest in an ESG fund. You do so because its performance looks good and because, more importantly, it is labelled ‘ESG’ - based on assets chosen for their positive environmental, social and governance qualities.
You want your investments to make money but not at the expense of the environment, workers’ rights or fair tax payments.
But then you discover that the credentials of your ESG fund do not stand up to close scrutiny. This is an all-too common occurrence and Goldman Sachs (GS) is just the latest asset manager to be hauled over the coals for false ESG claims.
Goldman Sachs has agreed to pay a $4m penalty to the Securities and Exchange Commission over charges that its asset management division misled customers about environmental, social and governance (ESG) investments.
The settlement with the SEC highlights an increasing clampdown on financial services groups when it comes to ESG-labelled investment products.
Earlier this year BNY Mellon agreed to pay $1.5m for allegedly mis-stating and omitting information about ESG factors for its mutual funds.Whether fines of $4m or $1.5m to companies the size of BNY and Goldman represent a 'clampdown' is open to question but it does show that fund managers are being monitored.
What is certain is that ESG funds have moved from niche status to mainstream in recent years with the number of ESG products on the market growing enormously. Estimates point to $2.7tn going into ‘ESG’ funds in 2021. These also include exchange...
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