$1.5 million: SEC fines BNY Mellon Investment Advisor for misstatements and omissions about ESG

Rick Steves

Investors are increasingly focused on ESG considerations when making investment decisions.

The Securities and Exchange Commission has fined BNY Mellon Investment Adviser, Inc. a $1.5 million penalty following misstatements and omissions about Environmental, Social, and Governance (ESG) considerations in making investment decisions for certain mutual funds that it managed.

According to the financial watchdog, from July 2018 to September 2021, the global multi-specialist investment manager “represented or implied in various statements that all investments in the funds had undergone an ESG quality review”.

That, however, was not always the case as the order found that numerous investments held by certain funds did not have an ESG quality review score as of the time of investment.

Did not always perform the ESG quality review

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.”

Adam S. Aderton, Co-Chief of the SEC Enforcement Division’s Asset Management Unit and a member of the Task Force, commented: “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.”

Without admitting or denying the SEC’s findings, BNY Mellon Investment Adviser agreed to a cease-and-desist order, a censure, and to pay a $1.5 million penalty.

The SEC’s order also noted that BNY Mellon Investment Adviser promptly undertook remedial acts and cooperated with Commission staff in its investigation.

“BNY Mellon Investment Adviser is pleased to resolve this matter concerning certain statements it made about the ESG review process for six U.S. mutual funds,” a spokesperson said in a statement, adding that the firm takes seriously its regulatory and compliance responsibilities.

BNY Mellon taps AON to enhance ESG data and analytics

In April 2022, the Bank of New York Mellon Corporation announced a partnership with Aon for a multi-faceted data and digital collaboration that will leverage the power and unique capabilities of both organizations to create new solutions to address evolving client needs.

With a focus on supporting the Environmental, Social and Governance (ESG) needs of clients, BNY Mellon and Aon will leverage both firms’ collective ESG data and analytics capabilities and unique data sets. The partnership will also include enhanced solutions in the areas of digital assets and data and analytics.

By streamlining Aon’s portfolio management and research process, BNY Mellon will be able to enhance net-zero reporting transparency. Aon’s proprietary ESG fund ratings will also be made available to asset owners, allowing them to better understand how asset managers are incorporating ESG into their investments, operations and organizational processes to help make better-informed decisions.

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