German asset manager DWS has rebuffed claims that it misled clients by overstating its sustainable investing activities, after the news of probes by US and German regulators into the allegations sent shares plummeting.
Shares in the €859bn group plunged by as much as 14.2 per cent yesterday, after reports emerged that the German regulator BaFin was investigating the asset manager after its former global head of sustainability claimed it was misreporting its ESG efforts.
But the Deutsche Bank-backed firm denied the reports on Friday in a statement and said: “We firmly reject the allegations being made by a former employee.”
“DWS will continue to remain a steadfast proponent of ESG investing as part of its fiduciary role on behalf of its clients.”
The firm’s ex-global head of sustainability Desiree Fixler, who was sacked earlier this year, first told the Wall Street Journal (WSJ) that the DWS 2020 annual report, published in March, included misleading statements.
In the report, DWS claimed that it had invested more than half of its $900bn assets according to ESG criteria.
But Fixler claimed that an internal investigation while she was at the firm found that the asset manager’s ESG risk management methods were extremely flawed, owing to its reliance on outdated techonology and external ratings providers.
Separately, court documents prepared by Fixler’s lawyer for her unfair dismissal claim allege that she told DWS that the reported ESG assets figure was false and “only a small number of the active portfolio managers embed and document ESG-integration factors,” Bloomberg first reported.
The greenwashing claims are also being investigated by the US Securities and Exchange Commission regulators, according to a person familiar with the matter first reported in the WSJ.
As well as rejecting the claims, DWS declined to comment “on questions related to litigation or regulatory matters.”
With businesses under more pressure than ever by shareholders and activists to ensure that their operations and investments do not damage the environment, asset managers have prioritised ESG investments.
But this is accompanied by widespread concern over false claims and “greenwashing” to improve the appearance of ESG credentials.
Recent research from data agency iResearch Services showed that more than half of financial services professionals in the UK believe the practice is rife within the financial industry.
The UK Treasury launched a new expert advisory group in June called the Green Technical Advisory Group (GTAG) in an effort to deliver the government’s “Green Taxonomy”, a framework for judging how environmentally friendly investments are.
The panel includes representatives from the financial industry, business bodies such as the CBI, the government’s environmental advisers the Committee on Climate Change, academics and NGOs.
It comes months after MPs urged the government to ban the “greenwashing” by making environmental labelling compulsory for consumer financial products and task regulators to stop misleading claims.