SEC fined BNY Mellon over ESG claims

Bank of New York Mellon said it has updated its investor communication materials to be more accurate and complete.


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Gabriela Bhaskar/Bloomberg News

The Securities and Exchange Commission has fined the investment management arm of Bank of New York Mellon Corp..

BK 2.08%

$1.5 million for misleading claims it made about funds that use environmental and social criteria for stock selection.

The Securities and Exchange Commission said Monday that BNY Mellon Investment Adviser Inc. It agreed to pay the fine after regulators found that some of the US mutual funds it manages did not undergo a quality review of environmental, social or governance factors from July 2018 to September 2021. He neither admitted nor denied the allegations.

The Wall Street regulator is ramping up its scrutiny of claims by ESG funds as investors pour money into this category.

The Bank of New York said in a statement that none of the six funds involved were part of its specific sustainable fund offerings. She added that the company had updated its investor communication materials to be more accurate and complete.

Regulators are struggling to keep pace with the boom in ESG investment that has recently increased the assets under management of these funds to trillions of dollars. There are few consistent standards for what constitutes an ESG stock or bond, leading some analysts to claim that major banks and asset managers are doing “greenwashing” — using new investment products to boost their bottom line in the name of doing good to the world.

Many equity funds that focus on sustainability prefer stocks of big tech companies like Microsoft Corp.

which scores well in ESG ratings but already dominates the stock market, also leading some observers to question how much they actually benefit from the environment.

The Securities and Exchange Commission and Federal Prosecutors are investigating Deutsche Bank AG‘s

The asset management arm after the Wall Street Journal reported last year that the DWS Group overstated its efforts to sustainable investing.

The SEC’s Enforcement Division also established a Task Force on Climate, Environmental, Social and Institutional Governance in March 2021.

The conflicts inherent in investing in the environment, society and governance made recent headlines after Tesla Inc.

CEO Elon Musk called it a “nefarious scam” after S&P Dow Jones Indices’ decision to remove the electric car maker from its ESG index, citing its emissions strategy, business conditions and handling of a regulatory investigation.

Meanwhile, HSBC Holdings PLC recently suspended a senior executive who had publicly argued that investors did not need to worry about climate change and that policy makers were exaggerating the risks.

Write to Dean Seal at dean.seal@wsj.com and Amrit Ramkumar at amrith.ramkumar@wsj.com

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It appeared in the May 24, 2022, print edition as “BNY Mellon unit fined $1.5 million.”

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