The police raid on Deutsche Bank AG and its asset management arm, DWS Group, in Frankfurt, Germany, earlier this year was a wake-up call for the entire asset management industry because the days of exaggerating green investments in environmental, social and governance (ESG) products has come to an end.
In October, a German consumer group sued DWS for allegedly misrepresenting its green credentials in marketing materials — this is a practice known as “greenwashing.”
Now Bloomberg reports CEO Stefan Hoops, who took office in June amid a greenwashing scandal, said the firm will dial back hype in ESG sales pitches.
Speaking Wednesday, Hoops said green marketing had been “exuberant” and now would be an appropriate time to “tone down” ESG investing opportunities.
Whistleblower and former DWS sustainability chief Desiree Fixler first raised questions about the legitimacy of the firm’s ESG investment products in August 2021. Investigations into DWS followed shortly after that.
Hoops said he “stands by” the firm’s previous ESG disclosures while authorities in the US and Germany investigate greenwashing claims.
Hoops said he’s carefully reviewed how DWS arrived at previous ESG disclosures, including those made in the firm’s 2020 and 2021 annual reports, which were singled out by Fixler for criticism. That review gave him “confidence” that the information contained in them was accurate at the time, though he said evolving regulation meant DWS subsequently changed how it handles ESG disclosures. -Bloomberg
The German consumer group alleges DWS told investors in marketing material that it allocates zero funds to controversial sectors such as fossil fuels, though material from the fund outlined it could include companies with up to 15% of revenue from that industry.
DWS is the highest-profile case of greenwashing in Europe. Other funds have also backed away from green hype in advertising ESG funds amid an aggressive regulatory environment.
Money managers have been waking up this year to ESG nonsense. Matt Lawton, T. Rowe Price Group Inc.’s sector portfolio manager in the Fixed Income Division, recently concluded: “It’s becoming increasingly difficult to find credible sustainability-linked bonds.”