Stockholm (NordSIP) – In the latest chapter of the DWS saga, media reports have disclosed that both American and German authorities are investigating the German asset manager, following greenwashing claims by its former Group Sustainability Officer, Desirée Fixler. DWS’s share price reportedly fell more than 13% on Thursday following reports.
Ms Fixler was appointed to her role at the end of June 2020, only for her exit to be announced at the start of April 2021. Four months after being fired, at the start of August, Ms Fixler gave an interview to the Wall Street Journal, where she explained that “only a small fraction of the investment platform applies ESG integration”, with the article adding that she also noted the absence of any quantifiable or verifiable ESG integration for key asset classes at DWS. The accusation would be tantamount to misrepresentation of the asset manager’s ESG integration efforts, given its advertisement that over half of its €459 billion assets under management take ESG factors into account in its 2020 Annual Report.
Now, the Financial Times has reported that BaFin, the German regulator, as well as US officials are conducting parallel investigations on both sides of the pond, as to whether the German asset manager has misrepresented its sustainability efforts. The FT report cites anonymous sources according to which Fixler raised concerns to the DWS management board in early November 2020, as well as the existence of an internal assessment according to which DWS’s ESG risk management system was “highly flawed because it relied upon outdated technology and used ESG assessments provided by a range of external rating suppliers”. DWS’s flawed ESG approach would have thus allowed portfolio managers to ignore the ESG assessment and allowed one of its dedicated ESG funds to include Wirecard, the controversial payments company which went bankrupt at the start of 2021.
Responding to the ongoing controversy, DWS issued a press release describing the allegation as “unfounded”, adding that “DWS stands by its annual report disclosures. We firmly reject the allegations being made by a former employee. DWS will continue to remain a steadfast proponent of ESG investing as part of its fiduciary role on behalf of its clients.”
The German asset manager’s defence seems to stand on a semantic point. “At DWS, we differentiated between `ESG Integrated AuM´ and `ESG AuM´ (which DWS referred to as `ESG Dedicated´) when presenting the assets under management in our Annual Report 2020 and reported both classifications. As we disclosed in our Annual Report 2020 on page 90, DWS labelled strategies as `ESG Integrated´ if they were actively managed and included coverage of ESG data (the overall SynRating) on more than 90% of the portfolio. “ESG Integrated AuM” were not counted towards the firm’s `ESG AuM´ (“ESG Dedicated”). The absolute numbers are transparently listed on page 92 and 93 of our Annual Report 2020,” the press release explained.
At the time of her appointment, DWS’s CEO, Asoka Wöhrmann, commented that “the appointment of our GSO is a huge step for us in creating a holistic approach to ESG at DWS. We are delighted to have Desiree on board to drive our sustainability strategy forward.”
“She has a fantastic track record in responsible investing, as well as valuable experience in global capital markets and product innovation. Her proven ability to develop ESG risk management, policy and reporting frameworks also makes her the perfect fit to elevate DWS’s status to become a leading ESG asset manager globally,” Woehrmann added.
The issues plaguing DWS could theoretically find echoes in Scandinavia. Although NordSIP is unaware of any such investigations, at the time of the launch of the Sustainable Finance Disclosures Regulation (SFDR), Theodor Christensen, Deputy Director Capital Market Regulations at Denmark’s Finanstilsynet disclosed to NordSIP that the Danish financial markets regulator had “established a dedicated unit that focuses exclusively on sustainable finance”.