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The Wall Street Journal reported on Friday that the United States Securities and Exchange Commission has opened an investigation into the investment management segment of Goldman Sachs. The survey focuses on Goldman’s ESG fund offerings.

Institutions and individuals who wish to invest in funds or stocks that meet environmental, social and governance criteria are generally left alone to determine whether financial products are ESG-friendly. Regulators have not adopted a single set of ESG guidelines that investors can use to judge the degree to which a fund or company adheres to ESG principles, however, they can be defined.

Goldman’s US Equity ESG Fund (GINGX) comprises 45 stocks, with the top 10 representing 38.7% of the portfolio. Here is the bank‘s description of its ESG orientation:

“A proprietary framework is used to identify and invest in a selected portfolio of companies that meet the Strategy’s ESG criteria. By integrating ESG criteria and through active engagement where deemed appropriate, the team seeks to invest in sustainable, industry-leading franchises, manage risk as well as benefit from decision-making. positive company and productive change at the forefront of the industry when possible.

Goldman also notes that up to 20% of the fund’s assets may not meet the bank’s ESG criteria or be invested in non-US issuers or fixed income securities.

Late last month, the SEC fined the Bank of New York Mellon investment advisory group $1.5 million for misrepresenting or omitting ESG investment considerations for mutual funds. that the bank manages. The fine was a first for the SEC, and there’s reason to believe others will follow.

According to data from the Investment Company Institute, an investment industry group that lobbies Washington on behalf of its members, there were 740 ESG-themed mutual funds and ETFs with assets valued at $529 billion. at the end of 2021, compared to 583 funds with assets of $381 billion at the end of 2020. US mutual funds and ETFs had a net asset value of $34.2 trillion at the end of the last year, ETFs accounting for $7.2 trillion of the total.

The SEC is proposing new disclosure and naming requirements that would give investors greater transparency into mutual funds, ETFs and other funds that claim to make investment decisions based on ESG factors.

Growing scrutiny of asset managers, rating agencies and proxy advisor ESG policies has spawned a growing organization dedicated to ESG accountability.

The Corporate Citizenship Project, a think tank dedicated to a data-driven approach to corporate governance issues, announced last week that Terry Branstad, former U.S. ambassador to China and former governor of Iowa, has been named national president of the organization. His 22 years as governor of Iowa make him the longest-serving governor of any state in U.S. history.

The Corporate Citizenship Project expects Ambassador Branstad to bring his unique insight as a pro-corporate governor and diplomat to his role in pushing proxy advisors like Institutional Shareholder Services (“ISS”) and d other “ESG activists” to eliminate material potential conflicts. of interest and increase transparency.

Upon his nomination, Branstad commented:

“I am proud to act, on behalf of American companies and investors, to bring much-needed reform to the way corporate governance issues are analyzed. Proxy advisors, rating agencies and ESG consultants have created an environment that has added unnecessary costs and burdens to U.S. businesses, consumers, and investors.These ESG activists have self-proclaimed authorities on which companies are good and which are bad, and in most cases, they base their decisions on standards that are arbitrary, political or, worse, the result of material conflicts of interest. I look forward to bringing a data-driven and transparent approach to this industry.”