It has never been easier to invest money and feel good doing it – at least if you believe the sayings of the financial industry. With the “megatrend sustainability”, fund companies advertise for investor money as if there is no tomorrow, and they launch new “green” funds almost every hour. Those who switch their money into sustainable investment funds fight against climate change, inequality and support innovative green products are tempting. And yes, who doesn’t want that?
The fund company DWS has also promised that. She even wanted to lead the ESG movement. ESG stands for Environment, Social and Governance. It is about investing in companies that are particularly environmentally and socially harmless and that are well managed. DWS boss Asoka Wöhrmann recently praised himself. Shortly afterwards, the announcement came that from 2021 onwards, every new securities fund would be ESG. Within the company, however, several executives had long since warned that one was visually much greener than one was. In reality, only “a small part” of the funds are really ESG.
The cockiness of the Deutsche Bank subsidiary is now taking revenge with full force and that’s a good thing: The former DWS sustainability boss has just publicly criticized her ex-bosses for completely covering her ex-bosses with the green marketing drum and thus deceiving investors. When it became known on Thursday that the US authorities were dealing with the case, the DWS share price collapsed by almost thirteen percent. A billion market value vanished into thin air within hours.
There would be no place for sympathy for the Frankfurt fund company: DWS maneuvered itself into this situation recklessly and through its own fault. There are also no mitigating circumstances to ensure that everyone does what they want in the absence of adequate ESG standards. DWS boss Wöhrmann also knew the criticism of his employees. Anyone who fooled their fund investors into carefully scrutinizing companies for sustainability criteria, but then doing so at most superficially, will cause damage. First, because unsuspecting investors are lured into new, supposedly green, and sometimes even more expensive funds. Second, because too much capital is still flowing into climate-damaging companies. The fight against climate change can only succeed if the money is channeled into the right companies, not into climate-damaging or windy business models.
On the basis of their supposedly unique ESG database, DWS fund managers, for example, had invested heavily in the fraud company Wirecard at the end of 2019, even with an ESG fund. The in-house data machine had given the DAX group the second best mark in the “Business Ethics” category until spring 2020 – at a time when Wirecard board member Jan Marsalek was presumably already planning his escape and special auditors were searching the company’s figures for substance. Anyone who has such ESG data no longer needs hostile competition.
Ideally, however, the DWS cause will now become a wake-up call for the entire industry. Asset managers should urgently take a step back in their product marketing. You should admit that it is anything but trivial to check a company for sustainability, that it takes knowledge and resources to examine business models and supply chains.
All other fund companies must now fear that sooner or later it will come out if they cheat on the subject of ESG. The financial supervisory authority, in turn, must formulate clear standards and then examine them seriously. Above all, whether what is on the label is also there. It owes that to the investors, who are usually overwhelmed by it. The hope is that the supervisors around the world will not want to be accused of not looking carefully at one of the most important political issues of the time.