Goldman’s New ETF: ESG in Everything But the Name

Muni fund focused on environmental and social issues skips divisive terminology.

Goldman Sachs Asset Management is adding to its lineup of exchange-traded funds with a socially conscious municipal bond fund as the debate over environment, social and governance investing rages.  

The Goldman Sachs Community Municipal Bond ETF (GMUN) launched Thursday, and charges an expense ratio of 0.25%, according to a company statement. The fund will track the Bloomberg Goldman Sachs Community Municipal Index and "targets municipal debt involving education, healthcare, clean energy, and more community related initiatives” the firm’s website reads.  

According to the release, the investments will target “municipalities and projects with positive impact that provide the opportunity to invest in education, healthcare, clean energy” and other “community-related initiatives.” Fund allocation will focus on investment-grade municipal debt with one- to 15-year maturities.  

While not labeled an ESG offering by its issuer, the ETF’s underlying index “focus[es] on fostering community and investing in essential services” according to the prospectus. Included in the underlying portfolio are “securities labeled green, social or sustainable,” or as the prospectus deems them, “GSS.” 

“Our goal was to really focus on a broad diversified exposure to the one- to 15-year space, with returns that were in line with an intermediate index, and still make sure that we are focusing on some of the projects that are going to help drive these municipalities towards a more resilient future,” Alexa Gordon, municipal bond portfolio manager at Goldman Sachs Asset Management, told etf.com. 

Nearly two years ago, Goldman joined the ranks of firms such as BlackRock Inc. and the Vanguard Group, the two largest ETF managers, to question bond issuers on topics such as combatting race-based equality and policing policies, among others, before arranging deals, Bloomberg News reported.  

Still, the fund’s launch comes as ESG investments have been hammered, in part, by political divisiveness on the issue. ESG-labeled funds shed $2.1 billion in the fourth quarter of 2022, compared with $6.1 billion of inflows in the year-ago period, according to data from research firm Strategas Securities.  Year to date, ESG ETFs have lost more than $700 million, according to Bloomberg data. 

Republican-led states have pulled more than $1 billion from the parent of the world’s largest ETF issuer, BlackRock, citing ESG concerns, while Democratically affiliated government officials have slammed the firm for not being environmentally friendly enough.  

Even Congress has taken up the subject. Earlier this month, lawmakers voted in favor of reversing regulation allowing retirement plan managers to consider ESG factors in making investment decisions as President Biden vowed to veto the action.  

That trend may accelerate as candidates such as Vivek Ramaswamy, the most prominent ETF industry participant to ever run for the highest political office, and Florida Governor Ron DeSantis continue to lambaste ESG ideology and investing. 

Goldman Sachs manages $26.8 billion among its 33 ETFs, according to etf.com data. 

Contact Shubham Saharan at [email protected]