DWS Fined for Overstating Sustainability Claims
The Deutsche Bank subsidiary DWS has significantly exaggerated its sustainability promises and must therefore pay 25 million euros. This is not the first fine for the asset manager due to the accusations.
Greenwashing Accusations Lead to Fine in Germany
The Deutsche Bank fund company DWS must also pay a fine of millions in Germany due to "greenwashing" accusations. The Frankfurt public prosecutor's office, which investigated on suspicion of capital investment fraud, imposed a fine of 25 million euros. DWS has been accused for some time of having sold so-called green financial products as "greener" than they actually are - thus "greenwashing".
"We welcome the fact that the investigations of the public prosecutor's office in Frankfurt am Main against DWS have now been completed," DWS announced. "We have already publicly stated in recent years that our marketing was sometimes exuberant in the past. We have already improved the internal documentation and control processes and will continue to work on making further progress here."
Growing Demand for Sustainable Investments
In recent years, the demand from investors for sustainable investments has increased. Large investors place more value on clean investments - also under pressure from the EU, which has created a kind of seal of approval for sustainable financial products with its taxonomy. The fund industry has launched a variety of ESG products. However, it is sometimes unclear to outsiders what exactly is counted as sustainable investments.
In search of evidence, prosecutors searched offices of the fund company in Frankfurt several times. DWS had always rejected the accusations. However, in June 2022, the head was replaced: Asoka Wöhrmann was succeeded by Deutsche Bank manager Stefan Hoops. DWS had advertised intensively with products with environmental and social characteristics (ESG) between mid-2020 and the end of January 2023.
Understanding ESG
ESG stands for Environment, Social, and Governance and is intended to indicate the consideration of environmental and social aspects in companies. However, according to the findings of the Frankfurt public prosecutor's office, the impression of DWS Group's market-leading position created towards the capital market was not fulfilled: Marketing statements such as "ESG is an integral part of our DNA" did not correspond to reality.
Authorities in the US had also investigated the "greenwashing" allegations. At the end of September 2023, the US Securities and Exchange Commission (SEC) ordered DWS to pay 25 million dollars (then 23.5 million euros) "for violations of anti-money laundering guidelines and misrepresentations regarding ESG investments".