SEC fines BNY Mellon over false ESG statements

May 27, 2022

On May 23rd, 2022, The Securities and Exchange Commission (SEC) charged BNY Mellon Investment Advisor, Inc. for misstatements and omissions about ESG considerations in undertaking investment decisions for mutual funds they oversee. BNY Mellon has agreed to settle the charges with the regulator, paying a $1.5 million penalty.

According to the SEC, between July 2018 to September 2018, BNY Mellon claimed that all investments in its funds had undergone an ESG quality review. However, the regulator found that several investments held by the funds did not have an ESG quality review score at the time of investment.

The SEC launched the Climate and ESG Task Force within the Division of Enforcement in March 2021, to analyse disclosure and compliance issues relating to investment advisers and funds ESG strategies.

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."

He went on to state that BNY Mellon investment did not always perform the ESG quality review it disclosed as part of its investment selection process for certain mutual funds it advised.

As ESG considerations grow, the Commission aims to hold investment advisors accountable for failure to describe their incorporation of ESG factors.

Commenting on this case and on the Task Force, Adam S. Aderton, Co-Chief of the SEC Enforcement Division' Asset Management Unit and a member of the Task Force stated, "The Commission will hold investment advisers accountable when they do not accurately describe their incorporation of ESG factors into their investment selection process."

On May 25th 2022, the SEC rolled out new ESG guidelines that require firms to disclose greater detail on their investment strategies and call for funds and advisors to report "census-type data", outlining such information in a more structured format.

Minerva identifies greenwashing as a genuine concern of ESG investors. Watch our introductory briefing on greenwashing for more information.