ESG funds Strategy

Goldman Sachs

JAMAI YOUSSEF
Contents
Introduction...........................................................................................................................................2
ESG investing..........................................................................................................................................2
ESG Rating..........................................................................................................................................3
Sustainability-based impact assessments...........................................................................................3
ESG products......................................................................................................................................4
Goldman Sachs.......................................................................................................................................5
The beginnings of Goldman Sachs......................................................................................................5
The development of Goldman Sachs financial activities.....................................................................5
Goldman Sachs international development.......................................................................................5
Goldman Sachs: active development since 2000................................................................................6
Goldman Sachs 2030 Sustainable Finance Commitment........................................................................7
Goldman Sachs ESG Funds.....................................................................................................................8
Goldman Sachs Global Environmental Impact Equity Portfolio..........................................................8
Goldman Sachs Emerging Markets Equity ESG Portfolio....................................................................9
Goldman Sachs Global Equity Partners ESG Portfolio.......................................................................10
Goldman Sachs and scandal over ESG FUND claims.............................................................................11
the SEC's press release.....................................................................................................................11
Climate and ESG Task Force.............................................................................................................12
ESG Fund claim explication...............................................................................................................13
References............................................................................................................................................14

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Introduction

Sustainable finance is often referred to as a process that considers environmental,

social, and economic issues Governance factors in investment decisions, leading to
increased long-term investment Sustainable management and projects. Its growth is
driven by investor desire Environmental and social impacts, and the economic
performance of investments. This growth is a Responding to a larger trend that many
countries around the world are mobilizing efforts to contribute to Global
improvements. Now, the financial world is actively trying to incorporate these
concepts into investment practice. The vehicle that emerges from this will is the
Environmental, Social and Governance Program (ESG) ratings, from which ESG
investing is born.

ESG investing
Environmental, social and governance (“ESG”) investing has evolved over the past
few years to meet demand Institutional and private investors and certain public
sector authorities looking for better integration Incorporate long-term financial risks
and opportunities into their investment decision-making process long term value.
Long-term factors may include environmental, social and governance categories
Involves controversies and downside risks that could erode stock value and improve
credit ratings risk over time.
As such, it aims to combine better risk management with higher portfolio returns,
reflecting investor and beneficiary value in one investment strategy. In this regard,
the investment community views ESG as an investment approach that aims to
incorporate increasingly consistent information about physical environmental, social
and governance developments, risks and opportunities into asset allocation and risk
management decisions to produce sustainable, long-term financial returns.
Furthermore, the approach can also support the development efforts of investors
and other stakeholders Environmental, social and governance information for ethical
or impact investments that generate financial returns Not the focus of the investor's
goals. In this regard, their demands are getting higher and higher Types of investors
who improve the alignment of their portfolios with society's values.
Deceleration aspects climate change, improving social justice practices and ensuring
high standards of corporate governance. ESG disclosure is gaining acceptance as it
can provide issuers with a useful tool for assessing and assessing communicate their
social responsibility practices, and investors wishing to assess potential Achieve social
returns consistently across organizations and over time.
Issuers that address these societal issues are more likely to avoid controversy and
enhance their reputations, better retain customers and employees, and maintain
shareholder confidence during medium to long-term periods of uncertainty and
transition. At this point, however, an open question is the extent to which current
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 ESG practices are sufficient to unlock important information that investors can
effectively access and use. While the social dimension of investing is important, the
commitment to sustainable financing of long-term value is at the heart of this report.
As such, it aims to contribute to a better understanding of how ESG investing
processes and practices can contribute to greater transparency and market integrity
and achieve desired outcomes.

ESG Rating
Established rating agencies, e.g. Morningstar, MSCI and Refinitiv, have developed
proprietary models to independently score funds. ESG ratings are one of the most
popular tools to assess the sustainability of corporates and investment funds. These
are available upon subscription to investment professionals and are characterized by
large coverage. The methodology is based on different scales of scoring (numerical
value) or rating (using letters), based on the ESG profiles of underlying equity
holdings. ESG company ratings are derived from the weighting of hundreds of
quantitative and qualitative E, S and G factors. Some academic studies have
developed novel methods to improve weighting models of ESG ratings for funds.
Aside from established ESG data providers, free-to-search fund ratings have emerged
that do not require a paid subscription. For example, Climetrics rates funds on a scale
of 1–5 green leaves, based on the climate risks and opportunities that the underlying
fund holdings entail. Their methodologies are transparent and combine quantitative
indicators (e.g. investments in fossil fuels) with qualitative aspects (e.g. management
action on sustainability)

Sustainability-based impact assessments

The last family assembles techniques and frameworks that either seek to gauge
sustainability as outlined by the SDGs or concentrate on indications particular to the
sector. These techniques get around the focus on GHG emissions. One approach,
created by the Cambridge Institute for Sustainability Leadership, proposes a set of
ideal and feasible measurements to quantify effect across the SDGs .
Other approaches propose the use of industry-specific indicators to signal the
exposure of portfolios, building on the extensive literature on industry sustainability
indicators (Roca and Searcy). An example of such an indicator is "fossil fuel reserve
emissions" from the Trucost Carbon Scorecard model. Using a variety of
environmental indicators, such as the Environmental Sustainability Index (ESI)
created by the Yale Center for Environmental Law, Scholten’s presents a
methodology to calculate the environmental performance of government bond
funds. In subsequent research, this technique is expanded by using social indices,
namely the Human Development Index.
More sophisticated technologies evaluate impact and consider a wider range of
environmental and social factors using LCA-based. Climate, waste, water, and air
quality challenges are all included under sustainability. In a new cutting-edge
framework, the biodiversity effect of various financial products in a bank's portfolio is
calculated.

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ESG products
An ESG investment product should contain only those securities with a high
sustainability score and would exclude companies with, for example, poor records on
pollution, labor relations or management practices. It would also exclude the
sovereign bonds of governments with similar poor records.

Research has shown that the use of ESG in security selection leads to better-informed
investment decisions, and that sustainability funds can perform better than non-
sustainable ones, partly because of better risk management over contentious issues.
Companies with a lower carbon footprint, for example, would face lower regulatory
or societal risk than a polluter, and so its shares should be less volatile over time.

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Goldman Sachs
Goldman Sachs Group is a leading financial services group. The group is best known
for its investment banking, asset management, and merger and acquisition services.
With operations in the US, Europe and Asia (in over 25 countries worldwide), this
multinational company employs over 33,000 people worldwide (2011). Goldman
Sachs is headquartered in New York, in the heart of Wall Street. Not limited to the
private sector, Goldman Sachs played an important role in the undervaluation of the
Greek debt (which led to the Greek crisis of 2010) by serving as an advisor to the
government.

The beginnings of Goldman Sachs

Marcus Goldman Sachs founded Goldman Sachs in New York in 1869. The group was
initially engaged in broking activities in the early years of its existence. In 1882
Samuel Sachs joined the group. The group took the name 'Goldman Sachs &
Company' in 1885 when Goldman's son Henry Goldman and Ludwig Dreyfuss joined
the company. Two years later, it began to engage in relatively risky foreign exchange
activities. By the end of the 1890s, the group had become a pioneer in the field of
commercial papers for companies

The development of Goldman Sachs financial activities

The group continued its activities until 1930, when it decided to enter the investment
banking business. In the 1950s, Goldman Sachs dedicated an entire entity to the field
of investment banking and within a few years became the leader in this market. The
group did not become international until the 1970s, with its first operations in the
United Kingdom. In 1974, establishments in Switzerland and Japan followed to
continue the international development of the group. In 1981, the group acquired J
Aron, which enabled it to establish a presence in South Africa.

Goldman Sachs international development

Goldman Sachs finds a financing of 500 million dollars from the Mitsui Financial
Group (SMFG) to make up for the losses of the 1986 crash. In exchange, SMFG
obtained 12% of Goldman Sachs' shares but without voting rights.

In 1994, the bond crisis and new issues on the part of the group led the latter to
reduce its workforce to generate more cash and remain solvent. Shortly thereafter, a
rebound in the bond markets and the financial markets in general helped the group
to recover. In the 1990s, the group's goal was to improve its international
development, particularly in Asia and the United Kingdom. In 2000, the group
merged with Spear and Leeds & Kellogg to become a heavyweight in the US options
and equities market.

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Goldman Sachs: active development since 2000

In 2002, the investment fund GS Capital Partners (owned by Goldman Sachs) bought
Berry Plastics Corporation. This operation makes the group one of the leaders in the
plastics market. Two years later, Goldman Sachs bought a 16.6% stake in British
Energy. In addition, the group created a new financial structure to improve
coordination between the different subsidiaries of the group.

In 2007, Goldman Sachs, the National Commercial Bank of Saudi Arabia (NCB) and
one of NCB's subsidiaries joined forces in various investment projects in Saudi Arabia.
In 2008, the group bought a 20% stake in Yangfan Group Co and fully acquired H20
Plus, a manufacturer and developer of beauty products.

During 2009, Goldman Sachs Asset Management announced that the group will
reinvest in its GS Vintage Fund V, up to 5.5 billion dollars. In addition, during the
same year, it repurchased 1.1 billion dollars that it owed to the US treasury on behalf
of the TARP's capital purchase program.

In 2011, Goldman Sachs sold its shares in Litton Loan Servicing to Ocwen Financial
Coportation for $264 million. In addition, in the same year, the group bought a 6.47%
stake in Max India Limited, a life insurance group, for $3 million. This transaction
brings the group's total stake in the life insurance sector to 15.6% of its total holding.

In 2012, the group announced the acquisition of Ariel Reinsurance's Bermuda-based

insurance and Dwight Asset Management.

In 2014, Goldman Sachs heightened its focus on and investment in technology,

launching leading-edge platforms like Marquee to advance trading, data security, big-
data management, and the ability to assess a broad spectrum of risks.

In 2018, Lloyd Blankfein announced his intention to retire; he stepped down as CEO
in September of that year and as chairman in December. David Solomon, who had
previously served as president and chief operating officer, succeeded Blankfein in
both roles. Solomon marked the beginning of his leadership with a focus on
expanding the firm’s product offering, improving its diversity profile, and positioning
the firm to build on its 150-year legacy

In 2019, the firm formed the Sustainable Finance Group to drive innovation and
capture new opportunities by providing clients with comprehensive sustainability
expertise across financing, advisory, risk management, and asset management. The
firm’s sustainability initiatives included a $750 billion target across nine areas of
sustainable development in climate transition and inclusive growth finance by 2030,
deepening a longstanding commitment to these efforts.

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 In September 2020, Goldman Sachs announced the acquisition of General Motors'
credit card business for $2.5 billion. In 2021, the bank opened offices in Paris to
strengthen its activities in France.

In August 2021, Goldman Sachs announces the acquisition of NN Investment

Partners, a Dutch investment fund for €1.6 billion. In September 2021, Goldman
Sachs announces the acquisition of GreenSky, a company specializing in real estate
restoration loans, for $2.24 billion.

Goldman Sachs 2030 Sustainable Finance Commitment

Goldman Sachs created a strategy little over a year ago to prioritize inclusive growth
and climate transition in all their client work. They also said that by 2030, they will
allocate $750 billion in funding, investment, and consulting activities to nine sectors
centered on these two objectives, as a way of expressing the depth of their
commitment.
First, they are putting effort into creating more thorough climate data and
encouraging thorough disclosure.
they have worked diligently to highlight their own reduction in greenhouse gas
emissions. Goldman Sachs was the first bank in the United States to disclose in
accordance with the Sustainability Accounting Standards Board (SASB) guidelines,
and they published their first Taskforce on Climate-related Financial Disclosure
(TCFD) report last year to outline how they manage and oversee climate change in
their operations.
Second, in addition to the long-term objectives, they're creating short-term
objectives to hasten the process even further. To ensure that their approach is in
accordance with the objectives of the Paris Agreement, they have signed the U.N.
Principles for Responsible Banking.
they shall improve their own emissions declarations and perform an effect study of
firm’s operations as part of this pledge. By the end of 2021, they'll also set interim
business-related climate goals in collaboration with their sector counterparts utilizing
this forum. they are also improving the proactive management of their operations; in
2015, they achieved carbon neutrality in operations and business travel, surpassing
all competitors in the financial services industry. To reach net zero carbon emissions
by 2030, they are already extending operational carbon commitment to cover our
supplier chain.
Third, they keep incorporating climate-risk factors into how they do business. they
will go into great detail in our second annual TCFD report, which will be released later
this year, on how they're considering climate-risk factors in both their business
processes and their choice of businesses.

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Goldman Sachs ESG Funds
Goldman Sachs Global Environmental Impact Equity Portfolio

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Goldman Sachs Emerging Markets Equity ESG Portfolio

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Goldman Sachs Global Equity Partners ESG Portfolio

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GS U.S. Equity ESG Fund

Goldman Sachs and scandal over ESG FUND claims

4 million dollars is the amount of the fine imposed by the American financial markets
regulator (SEC) on Goldman Sachs Asset Management (GSAM). The reason for this
penalty: the failure of the famous American investment bank to comply with
procedures concerning the promotion of ESG financial products.

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the SEC's press release
FOR IMMEDIATE RELEASE
2022-209
Washington D.C., Nov. 22, 2022 —
The Securities and Exchange Commission today charged Goldman Sachs Asset
Management, L.P. (GSAM) for policies and procedures failures involving two
mutual funds and one separately managed account strategy marketed as
Environmental, Social, and Governance (ESG) investments. To settle the charges,
GSAM agreed to pay a $4 million penalty.
The SEC’s order finds that, from April 2017 until February 2020, GSAM had
several policies and procedures failures involving the ESG research its investment
teams used to select and monitor securities. From April 2017 until June 2018, the
company failed to have any written policies and procedures for ESG research in one
product, and once policies and procedures were established, it failed to follow them
consistently prior to February 2020. For example, the order finds that GSAM’s
policies and procedures required its personnel to complete a questionnaire for every
company it planned to include in each product’s investment portfolio prior to the
selection; however, 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. GSAM shared information about its policies and
procedures, which it failed to follow consistently, with third parties, including
intermediaries and the funds’ board of trustees.
“In response to investor demand, advisers like Goldman Sachs Asset Management
are increasingly branding and marketing their funds and strategies as ‘ESG,’” said
Sanjay Wadhwa, Deputy Director of the SEC’s Division of Enforcement, and head
of its Climate and ESG Task Force. “When they do, they 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.”
“Today’s action reinforces that investment advisers must develop and adhere to their
policies and procedures over their investment processes, including ESG research, to
ensure investors receive the advisory services they would expect to receive from an
ESG investment,” said Andrew Dean, Co-Chief of the Enforcement Division’s Asset
Management Unit.
GSAM consented to the entry of the SEC’s order finding that it violated Section
206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-7. Without
admitting or denying the SEC’s findings, GSAM agreed to a cease-and-desist order,
a censure, and a $4 million penalty.
The SEC’s investigation was conducted by Salvatore Massa and Stephen Holden
under the supervision of Mr. Dean with the Enforcement Division’s Asset
Management Unit in the New York Regional Office.
The Division of Enforcement’s Climate and ESG Task Force was formed in March
2021. Among other things, it analyzes disclosure and compliance issues relating to
investment advisers’ and funds’ ESG strategies.

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Climate and ESG Task Force

To create programs to proactively uncover ESG-related wrongdoing in line with rising

investor dependence on climate and ESG-related disclosure and investing, the SEC
established the Climate and ESG Task Force inside the Division of Enforcement.
Sanjay Wadhwa, the Division of Enforcement's Deputy Director, oversees the Task
Force.

The Climate and ESG Task Force is coordinating the efficient use of Division
resources, including the use of sophisticated data analysis to mine and assess
information across registrants, to identify potential violations, such as material gaps
or misstatements in issuers' disclosure of climate risks under existing rules, and
disclosure and compliance issues relating to investment advisers' and funds' ESG
strategies.

ESG Fund claim explication

The SEC claims that until "sometime after" the approach was launched, Goldman did
not develop documented standards and procedures controlling how it assessed ESG
variables as part of its investing process.

According to Andrew Dean, co-head of the SEC's asset management enforcement

division, "today's action confirms that investment advisors must adopt and abide by
their rules and procedures over their investing processes, including ESG research."

Goldman complied with the SEC's findings without contesting them and accepted the
fine, a cease-and-desist order, and a reprimand. The civil probe by the government
investigating the bank's ESG claims first surfaced in June.

Goldman stated that it was "pleased to have settled this matter, which addressed
previous policies and processes connected to three of the Goldman Sachs Asset
Management Fundamental Equity Group's investment portfolios" in a statement.

The penalties for Goldman is more than twice as much as the $1.5 million that BNY
Mellon agreed to pay earlier this year for allegedly misrepresenting and withholding
data about ESG factors for its mutual funds. The SEC reached a settlement with an
investment adviser over ESG disclosures for the first time in that instance.

According to the SEC, Goldman Sachs' asset management unit controlled over $1.5
trillion as of April 2022. According to the regulator, a total of $238 million was
handled by the two mutual funds and independently managed account strategies in
2020.

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 With assets expected to reach $2.7 trillion in 2021, ESG investment products have
emerged as the asset management industry's fastest growing subsegment. ESG,
which is still vaguely defined, has drawn criticism for being utilized by some
businesses and investors to make inflated or false claims about their reputations for
sustainability and good governance.

A Trump-era regulation that prevented asset managers from taking ESG factors into
account when presenting retirement investing options to businesses was overturned
by the US Department of Labor. According to analysts, the new regulations will
probably make it possible for retirement plans provided by companies to include
more ESG funds.

References
-https://www.goldmansachs.com/our-firm/history/a-brief-history-of-gs.pdf

-https://www.robeco.com/en/funds/#!/sort=fav,reverse=false,lt=nest,perfid=5,hedged=false

-The materiality of ESG factors for equity investment decisions: academic evidence’, NN Investment
Partners and ECCE report, 2016

-https://www.robeco.com/en/insights/2019/01/the-link-between-esg-and-performance.html

-https://www.oecd.org/finance/ESG-Investing-Practices-Progress-Challenges.pdf

-Goldman Sachs and Barclays set up shop in Paris" [archive], on Les Echos, March 16

-Isabelle Chaperon, "In asset management, consolidation is accelerating"

-« Goldman Sachs scoops up digital lender GreenSky to boost consumer banking » [archive], sur
Reuters, 15 septembre 2021

-https://www.sec.gov/news/press-release/2022-209

-https://www.sec.gov/spotlight/enforcement-task-force-focused-climate-esg-issues

-https://www.ft.com/content/0e2b6e41-4113-437f-824b-80d7acd29579

-https://www.goldmansachs.com/media-relations/press-releases/2021/announcement-04-mar-
2021.html

https://www.gsam.com/content/gsam/dk/en/advisers/products/fund-finder/goldman-sachs-global-
environmental-impact-equity-portfolio.html#activeTab=performance

https://www.gsam.com/content/gsam/dk/en/advisers/products/fund-finder/goldman-sachs-
emerging-markets-equity-esg-portfolio.html#activeTab=holdings

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https://www.gsam.com/content/gsam/dk/en/advisers/products/fund-finder/goldman-sachs-global-
equity-partners-esg-portfolio.html#activeTab=holdings

https://www.nytimes.com/2022/06/12/business/sec-goldman-sachs-esg-funds.html

https://www.latribune.fr/entreprises-finance/banques-finance/banque/esg-goldman-sachs-
sanctionne-pour-ne-pas-avoir-suivi-la-procedure-941799.html

https://www.oecd.org/finance/esg-investing.htm

https://www.sciencedirect.com/science/article/pii/S0959652621022344

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