The U.S. Securities and Exchange Commission (SEC) announced today it has charged BNY Mellon Investment Adviser for making misstatements and omissions about the ESG considerations used for investment decisions in some of its mutual funds, and reached an agreement with the company for a $1.5 million penalty.
According to the SEC’s order, from July 2018 to September 2021, the firm made claims that all investments in the funds had undergone an ESG quality review, even though that was not always the case. The SEC found out that a number of investments held by certain funds did not have an ESG quality review score as of the time of investment.
Adam S. Aderton, Co-Chief of the SEC Enforcement Division’s Asset Management Unit and a member of the Task Force, said:
“Investors are increasingly focused on ESG considerations when making investment decisions. As this action illustrates, the Commission will hold investment advisers accountable when they do not accurately describe their incorporation of ESG factors into their investment selection process.”
The announcement comes as the SEC moves to increase scrutiny of the ESG claims being made by investment managers. Earlier this year, SEC Chair Gary Gensler said that the commission is looking into rules for ESG investment products, including disclosures for fund managers regarding the criteria used and data utilized for “ESG,” “green,” or “sustainable” labeled products.
Sanjay Wadhwa, Deputy Director of the SEC’s Division of Enforcement and head of its Climate and ESG Task Force, said:
“Registered investment advisers and funds are increasingly offering and evaluating investments that employ ESG strategies or incorporate certain ESG criteria, in part to meet investor demand for such strategies and investments. Here, we allege that BNY Mellon Investment Adviser did not always perform the ESG quality review that it disclosed using as part of its investment selection process for certain mutual funds it advised.”
The SEC statement indicated that BNY Mellon Investment Adviser did not admit or deny the findings.