SEC Announces First Enforcement Action by ESG Task Force


On May 23, the U.S. Securities and Exchange Commission (SEC) announced charges against BNY Mellon Investment Adviser, Inc. for misstatements and omissions about Environmental, Social, and Governance (ESG) considerations in investment decisions. The enforcement action, which requires BNY Mellon Investment Adviser to pay a $1.5 million penalty, is the first taken in connection with the SEC’s recently established Climate and ESG Task Force.

“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.”

According to the SEC, from July 2018 through September 2021, BNY Mellon Investment Adviser claimed that all investments in the funds had undergone an ESG quality review. However, the SEC alleges that “numerous investments held by certain funds did not have an ESG quality review score as of the time of investment.”

“Investors are increasingly focused on ESG considerations when making investment decisions,” said Adam S. Aderton, Co-Chief of the SEC Enforcement Division’s Asset Management Unit and a member of the Task Force. “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.”

The SEC announced the creation of the Climate and ESG Task Force on March 4, 2021. The task force will focus on developing initiatives to proactively identify misconduct related to climate and ESG issues. The task force will additionally “evaluate and pursue tips, referrals, and whistleblower complaints on ESG-related issues,” according to the press release.

Following the SEC’s announcement of the Task Force, the National Whistleblower Center (NWC) released a statement commending the task force’s creation. In July of 2020, the NWC released a report “Exposing a Ticking Time Bomb: How Fossil Fuel Industry Fraud is Setting Us Up for a Financial Implosion – and What Whistleblowers Can Do About It.” The report details “the dramatic understatement of risks posed by climate change to fossil fuel companies’ own financial condition and to the economy at large,” and highlights the crucial role whistleblowers can play in exposing these types of fraud.

“We applaud the SEC’s commitment to addressing fraudulent concealment of climate risk through the creation of this task force,” said John Kostyack, then-Executive Director of the NWC. “Decades of deception in the fossil fuel industry have cheated investors of critical information and left our economy woefully unprepared to address climate change. We look forward to working with whistleblowers and others fighting climate-related corruption to ensure that this task force succeeds with its critical mission.”

Since the SEC Whistleblower Program was created in 2010, whistleblowers have played a crucial role in the SEC’s enforcement efforts. Enforcement actions from whistleblower tips have allowed the SEC to recover nearly $5 billion from fraudsters. Correspondingly, the agency has awarded approximately $1.3 billion to 273 individuals since issuing its first award in 2012.


SEC Charges BNY Mellon Investment Adviser for Misstatements and Omissions Concerning ESG Considerations

More SEC Whistleblower News on WNN

Exit mobile version