The U.S. Securities and Exchange Commission (SEC) announced Monday that it has sued Deutsche Bank’s investment arm, DWS, one of the largest asset managers in Europe, over misleading statements the company made about its ESG investment process.
DWS has agreed to a $19 million fine to settle the charges, which is the largest greenwashing fine ever imposed by the SEC on an asset manager.
The SEC’s announcement follows a two-year investigation by the Commission, which was launched after Desiree Fixler, former head of sustainability at DWS, reportedly alleged that the company misrepresented the extent to which assets were invested in its annual report using ESG integration in the investment process. Fixler was fired from DWS in March 2021, immediately prior to the release of the company’s annual report.
In June 2022, German authorities raided the offices of Deutsche Bank and DWS in Frankfurt following media reports that DWS was exaggerating the green or sustainability-related aspects of financial products, and after examining evidence leading to a suspicion of ‘prospectus fraud’. DWS CEO Asoka Woehrmann resigned the next day.
According to a statement from the SEC, the Commission found that DWS “made materially misleading statements about its controls over the inclusion of ESG factors in research and investment recommendations for ESG-integrated products,” and that the company failed to address aspects of its global ESG integration. policy as offered to customers. The SEC added that DWS failed to implement policies that would have ensured that its public statements about its ESG-integrated products were accurate.
The announcement comes as the SEC considers a set of proposed disclosure rules for funds and advisors that claim to integrate ESG factors into their investment products and services, aimed at providing clearer and more consistent information to investors, and to reduce the risk of tackle greenwashing through the exaggeration or misrepresentation of ESG claims. Last week, the Commission adopted new rules requiring funds with names that suggest an investment focus on ESG or sustainability-related factors to invest at least 80% of asset values in line with these factors.
Sanjay Wadhwa, deputy director of the SEC’s Division of Enforcement and head of the Climate and ESG Task Force, said:
“Whether they are promoting the way they incorporate ESG factors into investment recommendations or doing something else of interest to investors, investment advisors must ensure their actions are consistent with their words. Here, DWS advertised that ESG was in its ‘DNA,’ but as the SEC’s decision shows, its investment professionals failed to follow the ESG investment processes it marketed.”
In a statement following the SEC’s announcement, DWS noted that the investigation “found no misstatements regarding our financial disclosures or in the prospectuses of our funds,” and that the company had no intent to defraud. took steps to address the weaknesses identified by the SEC.
“We have learned many lessons from the ever-evolving regulatory environment and are fully committed to continuing to improve. We are grateful to our customers for their continued trust in our products.”