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BNY Mellon’s investment management arm is turning to funds that donate part of their revenue to diversity charities, even as US financial groups come under attack from “anti-woke” politicians.
The custody bank’s Dreyfus government cash management fund recently filed with the Securities and Exchange Commission to launch a share class to allow clients to donate part of net revenue to a charity of their choice.
This builds on the existing Bold class of shares that contributes 10 per cent of net revenue to a scholarship fund at Howard University, a historically black university. A separate BNY Mellon-branded exchange traded fund launched last month invests in companies that promote “women’s opportunities” and donates 10 per cent of the management fee to a charity with similar goals.
The new funds come as Republicans and Democrats are drawing battle lines over the use of environmental, social and governance factors in investing. While red state politicians take aim at what they call “woke” investing, blue states are demanding that asset managers address the problems of climate change.
“We have certain clients who really like that idea that they can do well financially and do good at the same time,” said Hanneke Smits, chief executive of BNY Mellon Investment Management. “It’s not for every client so we have a whole wide range of capabilities.”
BNY Mellon runs its investment arm as a group of separate boutiques, each with a distinct approach to managing money and even its own office decor. Smits and the bank’s new chief executive, Robin Vince, have been looking for ways for them to work together without sacrificing their distinct brands.
“We’ve historically been quite siloed. It’s very important to us and to our clients that we continue to give the [individual] firms independence over their investment processes. Our firms are quite different,” Smits said.
Several BNY brands, including Newton and Insight, emphasise their ESG credentials and have joined the Net Zero Asset Managers initiative, but the others have not.
“We’re not set up right now in a way that we’re dictating things, at least through the investment management lens, what each of the firms should do,” Smits said.
That has not protected BNY Mellon from being included among financial institutions that have come under attack from “anti-woke” critics. The Texas comptroller included 30 BNY Mellon and Dreyfus funds on a list of investment products that the state considers to be “boycotting” fossil fuel.
Like many managers, BNY Mellon is under pressure to cut costs because its assets under management fell sharply along with markets in 2022 and because the growth of passive funds has pushed down fees more broadly. “Clients want to do things more cheaply . . . There is pressure on fees, there’s also the pressure on delivering outcomes,” she said.
In the first quarter, the group’s assets under management rose 4 per cent to $1.9tn, as strong inflows to its fixed-income and liability-driven investment strategies were partly offset by outflows in equities and other areas.
Smits was recently named global head of the 30 per cent club, which has pushed for more women on public company boards. She said she plans to broaden its focus: “A lot of corporates are making strides in terms of diversity of their workforce, but it’s still not coming through at the senior level.”
“There are not enough women in CEO, CFO roles or chair roles. So I think we need to focus on 30 per cent in executive roles and, as part of that, front office roles. There is also an intersectionality piece, and that’s different for women of colour, and women from the LGBTQ community,” she added.
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