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November 24, 2022

Regulatory Round-up: Goldman Sachs AM hit with fine; Esma consults on fund name greenwashing

By Victor Smart

Goldman Sachs Asset Management has been charged by the US Securities and Exchange Commission for failing to follow policies and procedures for environmental, social and governance investments, and has been fined $4mn. The charges relate to policy and procedure shortcomings between April 2017 and February 2020, which involved two mutual funds and one separately managed account strategy that Goldman Sachs marketed as ESG investments, the SEC said

Rules proposed by former president Donald Trump’s administration that would have curbed pension funds’ ability to consider ESG factors when investing have been dropped by the US Department of Labor. The department announced a final rule that allows pension plan fiduciaries to consider climate change and other ESG factors when selecting retirement investments and exercise shareholder rights, such as proxy voting. After consultation, the department concluded that the proposals from 2020 – which would have discouraged considering those factors even when they would have benefitted participants financially – “unnecessarily restrained” plan fiduciaries.

The European Securities and Markets Authority, the EU financial markets regulator, has launched a consultation over proposed rules on the ESG and sustainability-related terms used in fund names, in order to tackle greenwashing. Esma is considering imposing quantitative thresholds for the minimum proportion of investments needed to support the sustainability credentials suggested by fund names. Among other proposals is an 80 per cent quantitative threshold for the use of ESG-related words. 

The three European supervisory authorities have published a document that uses a ‘Questions & Answers’ format to detail disclosure requirements under the Sustainable Finance Disclosure Regulation, which comes into effect from January 1 2023. The paper from the European Banking Authority, the European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority provides more clarity around taxonomy-alignment disclosure requirements. The authorities also set out the required information on financial products and specific requirements for financial advisers and execution-only financial market participants.

The UK Financial Conduct Authority has announced it will develop a specific code for ESG data and ratings providers, albeit just on a voluntary basis, to bring greater market transparency to those services. The code is set to focus on a number of recommendations released earlier this month by the International Organization of Securities Commissions. These are aimed at promoting “good practices” to tackle greenwashing risks relating to asset managers and ESG rating and data providers.

The UN-convened Net-Zero Asset Owner Alliance has called on asset owners and index providers to develop and follow a series of net zero-aligned benchmarks, to help them meet their net zero objectives. The NZAOA, which represents more than 80 institutional investors that together hold $11tn of assets, has published recommendations with 10 key benchmark principles. It hopes that these will provide the “basis and context for a discussion on best practices for constructing net zero-aligned benchmarks and index universes”.

 

A service from the Financial Times