DWS and Deutsche Bank offices raided for second time
German police raided the offices of DWS and Deutsche Bank, which owns 80% of DWS, yesterday morning, as part of a probe into claims that the company exaggerated the sustainability credentials of some of their financial products. Approximately 50 officers, including public prosecutors, federal police and officials from BaFin, the German financial regulator, arrived at the DWS premises and Deutsche bank twin towers mid-morning on Tuesday 31st May. This is the second time in less than a month that Deutsche Bank has been raided, as part of the $1tn greenwashing scandal.
The issue of greenwashing has become one of the most strongly debated topics in investment management. Greenwashing is the process of conveying false impression or providing misleading information about how a company’s products are more sustainable than they actually are. It has been said that the company had made misleading statements in its 2020 annual report over claims that more than half of the groups $900bn assets were invested using ESG criteria. Fixlar, who has been DWS’s global head of sustainability until she was sacked last year, accused the company’s ESG risk management system of being highly flawed and said she had previously reported her concerns to the DWS management board back in 2020. The chief executive of DWS has announced this morning that he will resign and will be stepping down next week as a result of the recent raid and allegations. Since his resignations, DWS shares have slumped by 7%.
“…who cares if Miami is six metres underwater in 100 years?”
ESG has also become a hot topic recently within the financial industry. HSBC’s asset management team suspended its global head of responsible investment this month after he questioned the financial risks of climate change at the Financial Times Conference. Stuart Kirk, who’s role is to consider the impact of investment on ESG issues, gave a presentation at the summit and said, “there’s always some nut job telling me about the end of the world… who cares if Miami is six metres underwater in 100 years?”.
It is only natural to think that the investigation into DWS will spark concern of greenwashing across the whole of the investment industry. There is an important question as to how ESG funds should be regulated to mitigate or even completely eradicate greenwashing. Investment products and funds are constantly being launched across the globe in order to capitalise on the attention that the ESG movement has received. According to data the number of sustainable funds launches in the UK jumped from 98 in 2009 to 396 in 2019 – a 304% increase within a decade. Whilst some of these funds are completely transparent with their reporting, the issue of greenwashing is still on the rise. The lack of agreed ESG standards and compliance is a major barrier of progress in this market. Considering these challenges, initiatives are currently being discussed with amongst regulators and governments in order to clarify what an ESG-compliant financial product could look like.
Glossing over ESG claims is by no means new behaviour by companies who are attempting to appeal to increasingly eco-conscious consumers. However, the investment industry is more aware of greenwashing and perhaps now better able to pick up on the signs. With more allegations come more scepticism and so in caution of being hook winded, companies that aren’t transparent with their claims, could risk a fall in investment opportunities as investors become more clued up. Transparency is playing an ever-increasing role for businesses across the board. Even for companies who aren’t obliged to report on their sustainability, are still at a much greater advantage if they do. The pressure is on and that’s why we at eco-shaper are working to make sustainability reporting as easy as possible for companies so that they can do the right thing, without using up too much time, money or resource.
At eco-shaper, we drive action on climate change and streamline carbon footprinting. For example, we can help calculate emissions across the entire ecosystem that companies work across and produce automated reporting based on outcomes. It’s like Xero, for sustainability. Contact us to be part of our research group on