DWS fined $19 million by SEC for ‘ESG misrepresentations’

DWS was fined $19 million by the Securities and Exchange Commission for misrepresentations regarding ESG investments, ending a two-year investigation by U.S. regulators.

The Frankfurt-based asset manager, which is majority owned by Deutsche Bank, was also fined $6 million for failing to have anti-money laundering procedures, bringing the total fines for both issues to $25 million. It became.

The SEC said in a statement that DWS Investment Management Americas “made materially misleading statements about its management of incorporating ESG factors into its research and investment recommendations for ESG-integrated products, including certain actively managed mutual funds and separately managed accounts.” said.

The SEC said DWS “promoted itself as an ESG leader adhering to certain policies to incorporate ESG considerations into its investments.”

However, the regulator found that from August 2018 until late 2021, DWS “failed to adequately implement certain provisions of its Global ESG Integration Policy as customers and investors were led to believe it would do so”. was certified.

read DWS chief: ‘We made the right decision’ after greenwashing claims

“Whether promoting how they incorporate ESG factors into their investment recommendations or making other representations that are important to investors, investment advisors must ensure their actions align with their words. We must do so,” said Sanjay Wadhwa, Deputy Director and Chief Executive of the SEC Division of Enforcement. Climate and ESG Task Force.

“Here, DWS touted ESG as being in its ‘DNA,’ but as the SEC’s order makes clear, DWS’ investment professionals did not follow the ESG investment process touted by the company. .”

The SEC said DWS neither acknowledged nor denied the SEC’s findings.

DWS has been battling accusations of greenwashing since former employee Desiree Fixler accused the company of exaggerating its ESG credentials in its 2020 annual report.

“After an extensive two-year investigation, the SEC’s ESG mandate found no misstatements in our financial disclosures or the fund’s prospectus,” DWS said in a Sept. 25 statement.

We have consistently stated that we support financial disclosure and fund prospectus disclosure. The order also makes clear that the weaknesses identified by the SEC are related to processes and procedures that the company has already taken steps to address. I’m glad these issues have been resolved. ”

CEO Stephen Hoopes defends DWS’ crisis response

In an interview on September 20th financial newsAhead of the SEC’s announcement, DWS CEO Stephen Hoopes said the company had made the “right decision” to stabilize its business since the greenwashing allegations against it emerged.

Hoopes parachuted into the asset management firm “without much preparation” to take charge of DWS following the sudden resignation of his predecessor, Asoka Wehrman, who resigned in June 2022.

“There were a lot of careful decisions about what to do and what not to do because we didn’t have time,” Hoopes said of his first few weeks in the top job.

“In hindsight, we made the right decision because no one quit. Not one of our top 200 people quit in the first nine months.”

DWS, which oversees €859 billion, has made several changes to its ESG approach since the allegations against it first surfaced. These include overhauling the Group Sustainability Council and transforming it into a committee of the Board of Directors. It also established a sustainability oversight office within the chief financial officer’s department and a dedicated sustainability strategy team.

DWS, which is also under investigation by Germany’s financial regulator over its ESG statements, announced in July that it had set aside 21 million euros in reserves to be used to pay regulatory fines.

To contact the author of this article with feedback or news, email David Ricketts.

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