June 1, 2022
German police have staged raids on the asset management unit (DWS) of Deutsche Bank as part of an investigation into potential ESG-related prospectus fraud at the firm. The raid has also led to the resignation of DWS’ CEO.
According to public reports, Germany’s Federal Financial Supervisory Authority (BaFin) has launched an investigation into DWS, stemming from a 2020 annual report where DWS stated that more than half of its $900 billion in assets under management were invested using a system where companies are graded based on ESG criteria. This statement was contradicted by DWS’ former head of sustainability who has alleged that an internal assessment reflected that only a fraction of the companies on the platform were graded. The assessment added that there was no quantifiable or verifiable ESG-integration for key asset classes at DWS.\
The raid also follows public reports of investigations by the SEC and DOJ into whether DWS has misled investors on its use of ESG considerations in its investment practices.
The police raid and regulatory investigations reflect the potentially severe consequences for firms that mislead investors concerning their ESG investing strategies. As reported earlier in IAA Today, we are also starting to see SEC enforcement actions concerning ESG disclosures (see Wahed case, Vale case, BNY Mellon case).
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