The U.S. Securities and Exchange Commission (SEC) sanctioned an investment fund manager in an alleged greenwashing case, charging that the firm misrepresented the green bona fides of certain mutual funds.
The firm, BNY Mellon Investment Adviser, Inc., agreed to settle the regulator’s allegations without admitting or denying the charges.
The firm agreed to to pay a US$1.5-million penalty along with a cease-and-desist order and a censure stemming from alleged inaccurate claims about the funds’ ESG review.
The SEC’s order alleged that the firm “represented or implied in various statements that all investments in the funds had undergone an ESG quality review, even though that was not always the case.”
In fact, the regulator found that investments held by certain funds didn’t have an ESG quality review score when they were bought.
As investors increasingly focus on ESG, the SEC said it would hold investment advisers accountable when they don’t accurately describe their incorporation of ESG factors in their investment decisions.
“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 enforcement division and head of its climate and ESG task force, in a release.
“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.”
The SEC noted that the firm cooperated with its investigation and took voluntary remedial action, including revising its disclosure and modifying its policies and procedures.