If everything goes well, Deutsche Bank is happy to acknowledge its fund subsidiary DWS, which ultimately stands for everything that the parent company strives for: it delivers stable income, does not gamble with derivatives and should make the banking group less dependent on volatile investment banking. If there are problems, however, then one suddenly seems to distance themselves from the 80 percent subsidiary in Frankfurt’s twin towers, even though their headquarters are diagonally across the street. At least that’s how some in Frankfurt’s financial scene suggest that CEO Christian Sewing has not yet explicitly protected the daughter against allegations of greenwashing her funds. In fact, the Deutsche Bank press office is currently referring all inquiries to DWS. As if it were a completely different company.
The extent to which the parent company is responsible is likely to become an interesting question. The allegations are ultimately about the fact that DWS may have presented itself greener than it is. This is what the former DWS head of sustainability, Desiree Fixler, says, and these allegations are now being investigated by authorities in the USA, the SEC and the Justice Department. The German financial regulator Bafin is also dealing with the matter. It is about extremely optimistic statements at the Annual General Meeting and possibly also about incorrect information in the annual report. The DWS rejects the allegations as unfounded. The investigations are still at the beginning and it remains to be seen whether there has been any wrongdoing.
According to SZ information, the supervisors have now also looked at the role of DWS supervisory board chairman Karl von Rohr, who is Deutsche Bank’s full-time board member for private customers. “The supervisors broke in with a fairly large team and apparently take it very seriously,” says a company insider. Fixler had already sent her allegations against CEO Asoka Wöhrmann to the chief controller of Rohr in mid-March 2021. The Supervisory Board prematurely extended Wöhrmann’s contract a few days. Did the inspectors take enough time to examine the allegations?
Relief report from external consultants
Deutsche Bank announced that the committees had been informed of all relevant events. The DWS had previously announced that the allegations had been investigated by an independent party, and that the report produced thereupon showed “that none of the allegations made by the ex-employee were based on facts, including greenwashing”. As several insiders confirmed, the DWS had entrusted the auditing and consulting company PwC with the audit. PwC did not comment. Both left open whether the bank or its fund house had also informed the supervisory authority of the allegations.
In the meantime, the PwC report should also be available to the supervisory authorities. And there you will probably read carefully again an analysis by Morningstar. The fund rating agency critically examined DWS’s sustainability efforts last autumn. According to the study, “all DWS fund managers have access to ESG research,” and analysts have to take ESG considerations into account. The respective fund managers would have “a lot of leeway when weighting ESG factors when selecting stocks, risk management or building the portfolio.” ESG – the abbreviation for environment, social and corporate governance – stands for sustainability in the financial sector.
Deutsche Bank does not want to leave anything to chance
The allegations against DWS are being followed closely in the fund industry. The question is to what extent asset managers are allowed to market their products as sustainable – or at least claim to also take sustainability criteria into account when investing. While new rules are gradually being introduced at EU level, the topic of ESG is currently high on the agenda of regulatory authorities as well; Most recently, the Bafin presented a draft guideline on this. The goals of the initiative include: creating clarity, preventing greenwashing.
As cautious as Deutsche Bank is currently responding to inquiries about DWS, the processes at corporate headquarters are apparently taken seriously. The bank has had enough trouble with US authorities. Too much not to want to control such things from the start: Shortly after the investigation became known, Deutsche Bank took over the lead in the legal dispute in the DWS matter, say those familiar with the proceedings. Deutsche Bank said it would not comment “on issues related to litigation or our interaction with regulators.”