Germany’s largest asset manager, DWS, is braced to pay €21 million (£18m) to regulators as it tries to draw a line under a greenwashing scandal that has dogged the group for more than two years.
The company has been under investigation by the US Securities and Exchange Commission (SEC), German financial watchdog BaFin and Frankfurt criminal prosecutors over allegations that it overstated the share of its assets that were invested using environmental, social and governance (ESG) criteria.
DWS has denied any wrongdoing, but has said that it is in “advanced resolution discussions” with the SEC to “resolve their ESG investigation” in its half-year report. The asset manager has set aside €21 million (£18m) to cover the cost of the settlement, which is expected to be announced soon.
The scandal first came to light in 2021, when former DWS employee Desirée Fixler alleged the company had made misleading statements in its 2020 annual report over the size of its ESG assets. Fixler was fired after raising her concerns internally, and she subsequently filed a formal whistleblower complaint.
DWS chief executive Stefan Hoops stressed last Wednesday that the company stood by how it reported its ESG assets and the prospectuses for relevant funds. However, he acknowledged that the asset manager’s marketing “may have been overly exuberant” in the past.
Hoops is hoping a settlement with authorities will allow DWS to focus on growing its assets under management (AuM). The company is seeking to expand its share of alternative assets, including property and infrastructure.
The SEC has taken a hard-line approach to asset managers who have overstated their ESG credentials. In November 2022, the SEC fined Goldman Sachs Asset Management $4 million (£3.1m) for failing to comply with its own ESG policies and procedures. Five months earlier, BNY Mellon’s investment arm was hit with a $1.5 million (£1.1m) penalty for misleading claims about funds that use environmental and social criteria to pick stocks.
These fines send a clear message to the asset management industry that the SEC will not tolerate greenwashing. In response to these allegations, DWS has implemented several changes to its ESG approach, including an overhaul of its group sustainability council into a committee of the executive board.
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