BNY Mellon fined $1.5m for fund ESG ‘misstatements’

First legal settlement related to ESG investment processes

BNY Mellon Investment Adviser has been fined $1.5m by the US regulator for “misstatements and omissions” regarding ESG investment processes in a number of funds.

The Securities and Exchange Commission (SEC) found that from July 2018 to September 2021 that the firm said all the investments in the funds had undergone an ESG quality review, but this was not always the case. The SEC discovered “numerous investments held by certain funds did not have an ESG quality review score as of the time of investment”.

It is the first legal settlement related to funds’ ESG descriptions.

Without admitting or denying the SEC’s findings, BNY Mellon Investment Adviser agreed to a cease-and-desist order to pay the $1.5m penalty for violating Sections 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rules 206(4)-7 and 206(4)-8, and Section 34(b) of the Investment Company Act.

“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,” said Sanjay Wadhwa, deputy director of the SEC’s division of enforcement and head of its Climate and ESG Task Force.

“Here, our order finds 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 Aderton, co-chief of the SEC enforcement division’s asset management unit and a member of the taskforce, issued this warning: “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.”

A BNY Mellon spokesperson said: “BNY Mellon Investment Adviser is pleased to resolve this matter concerning certain statements it made about the ESG review process for six US mutual funds. While none of these funds were part of the BNYMIA “Sustainable” fund range, we take our regulatory and compliance responsibilities seriously and have updated our materials as part of our commitment to ensuring our communications to investors are precise and complete. 

“We are proud of our heritage and track record in responsible investment and are committed to continuing to be a trusted partner for our clients’ responsible investing needs.”


Natalie Kenway

Natalie is editor in chief at MA Financial covering ESG Clarity, Portfolio Adviser and International Adviser. She was previously global head of ESG insight for ESG Clarity and has been an investment journalist...