GSAM preps two Paris-aligned ETFs

The products would track indexes built by the company

Goldman Sachs Asset Management is preparing two sustainable ETFs within its ActiveBeta line, recent regulatory filings show.

By October, the company could launch its ActiveBeta Paris-Aligned Climate Emerging Markets Equity and International Equity ETFs, according to initial prospectuses filed with the Securities and Exchange Commission July 15.

Those products would invest at least 80% of their assets in corresponding indexes built by Goldman Sachs Asset Management that aim “to meet the minimum requirements to be an ‘EU Paris-Aligned Benchmark’ as defined by the European Commission Delegated Regulation,” according to the prospectuses. The indexes exclude companies that have significant business in fossil fuels, including virtually any involvement with coal or lignite, tobacco and weapons, or whose business goes against United Nations Global Compact principles.

The asset manager then applies its ActiveBeta factor subindexes to select and weight the funds’ holdings, including companies with low greenhouse gas emissions, targeting a 50% reduction in emissions compared with a reference index, according to the filing.

GSAM managing director Raj Garigipati is the portfolio manager for the two forthcoming ETFs. Garigipati is also a portfolio manager on GSAM’s $6.7m ActiveBeta Paris-Aligned Climate US Large Cap Equity ETF, among numerous others. That product, which launched late last year, has seen net returns of -15.7% year-to-date through July, according to data from Morningstar Direct.

In June, Bloomberg reported that the SEC was investigating some of GSAM’s mutual funds to determine whether the products’ ESG claims were reflected in their investments. That investigation, along with the SEC’s settlement with BNY Mellon, appears to show an increased focus by the regulator on potential greenwashing.

In a statement at the time, Goldman Sachs said that it was cooperating with the SEC and that the investigation related to three products representing a total of $725m as of April — the Goldman Sachs ESG Emerging Markets Equity Fund, International Equity ESG Fund and a US Equity ESG separately managed account option.