Goldman Sachs (GS) to Pay SEC $4M Penalty Over ESG Fund Case

Goldman Sachs Group Inc.’s GS asset-management arm will pay $4 million to settle the Securities and Exchange Commission’s claims that Goldman Sachs Asset Management, L.P. (GSAM) failed to follow policies and procedures for certain environmental, social and governance (ESG) investment products.

The SEC uncovered procedural failures involving the ESG research used to select and monitor securities from April 2017 to February 2020.

The company did not have written policies from April 2017 until June 2018 for ESG research in one product. Even when such policies and procedures were established, it was not consistently followed until February 2020. 

GSAM’s established policies and procedures required its personnel to complete a questionnairefor every company to screen investments before adding them to funds or other portfolios. However, the ESG questionnaires were filled after securities were already selected for inclusion in many instances.

With investors increasingly preferring ESG investments, the branding and marketing of such funds and strategies have increased. Sanjay Wadhwa, deputy director of the SEC’s Division of Enforcement and head of its Climate and ESG Task Force stated that in such cases investment advisors “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.”

Goldman faces many investigations and lawsuits from investors and regulators. Such unresolved lawsuits are expected to lead to increased expenses and litigation provisions.

Also, supply chain issues, the conflict between Ukraine and Russia and significant monetary tightening globally to control raging inflation have affected stock prices and slowed global economic growth. With companies veering away from mergers and acquisitions (M&A) and debt and equity issuances, GS’ investment banking business is expected to remain subdued.

So far this year, shares of GS have inched up 0.3% against the industry's 7% decline.

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It carries a Zacks Rank of 3 (Hold) at present.

Stocks Worth a Look

A couple of better-ranked stocks from the finance space are Capital Southwest CSWC and AssetMark Financial AMK.

The Zacks Consensus Estimate for Capital Southwest’s current fiscal year earnings has moved up 4.3% in the past 30 days. In the past month, its shares have increased 2.4%. Capital Southwest carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

AssetMark Financial currently carries a Zacks Rank #2. Its earnings estimates for the current year have been revised 5.4% upward in the past 30 days. In the past month, its shares have rallied 30.1%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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