The Securities and Exchange Commission is investigating Goldman Sachs over its ESG funds, as the regulator increasingly scrutinises firms over sustainability claims.

The agency is examining ESG funds within the bank's asset management arm as part of a civil investigation, according to two people familiar with the matter who spoke to the Wall Street Journal.

Goldman Sachs AM has at least four funds that are described as ‘clean energy' or ESG, after it rebranded its Blue Chip fund to the US Equity ESG fund in June 2020.

The reports mentioned that the probe could end without formal enforcement action.

SEC unveils new ESG fund disclosure and naming requirements

Regulators have intensified their scrutiny of sustainable funds as their popularity has risen, with the SEC launching an ESG taskforce last year to focus on whether firms were misleading investors on the subject.

The SEC recently proposed new rules that would broaden its fund naming rules for ESG funds and require greater disclosure from firms on topics such as greenhouse gas emissions and proxy voting records.

Last month, the regulator fined BNY Mellon's Investment Adviser arm $1.5m for penalties following "misstatements and omissions" about its ESG approach to managing funds. DWS chief executive Asoka Woehrmann also resigned after a raid on the business by German police and regulator BaFin following allegations of greenwashing and misleading investments.