According to a media report, the American stock exchange regulator (SEC) is investigating the Deutsche Bank fund company DWS on suspicion of greenwashing.

The supervisors check whether the asset manager has overstated the scope of his sustainable investments and neglected assessment criteria for sustainable investments.

Green dyeing is tantamount to a fraudulent label.

The Wall Street Journal first reported on the investigation, citing people familiar with the matter.

The investigation by the SEC and the Brooklyn federal attorney's office is in an early stage.

Markus Frühauf

Editor in business.

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The share price of the fund company collapsed by almost 14 percent on the German stock exchanges. The title of Deutsche Bank also became cheaper by more than 2 percent. The DWS declined to comment on the report. According to the Wall Street Journal, the background to the investigation is allegations by Desiree Fixler, the former head of DWS's sustainability department. This is of the opinion that investments based on sustainability criteria have been overrated. Fixler had made these allegations weeks earlier against the "Wall Street Journal". She came to DWS in September 2020, but had to leave after her probationary period.

The focus is on the assets of DWS, which are invested according to the sustainability criteria for the environment, social development (social) and good corporate governance (ESG). In its 2020 annual report, DWS reported 460 billion euros and thus more than half of the assets under management under the “ESG integration” category. However, these are only fund assets that are checked for sustainability using ESG data, but do not necessarily meet ESG criteria. DWS put the assets under management with the ESG approach at 76 billion euros.

The difference between “ESG integration” and “ESG approach” is explained in the annual report, even if not every reader of the balance sheet will find the presentation to be transparent. After Fixler's first attack, DWS pointed out that an independent third-party company had thoroughly investigated the allegations. "The resulting report says that none of their allegations were based on facts, including greenwashing," the DWS said in early August. It can be assumed that Fixler has now also reported the allegations raised in the "Wall Street Journal" to the US authorities.

Deutsche Bank and DWS are very committed to sustainability and are expanding their business significantly. More and more investors, institutional and private, are investing their money according to ESG criteria. In some cases, large capital collection agencies such as insurers or pension funds are also forced to do so. However, the ESG standards are still vague. DWS has thus defended itself: The standards and norms are not yet mature and are still developing.

However, the supervisors and the EU Commission are working on binding ESG criteria. The German financial regulator BaFin is planning a guideline for sustainable fixed assets. According to this, a plant should only be considered sustainable if the assets behind it make a significant contribution to the achievement of environmental goals or to social development. That means a minimum investment quota of 75 percent in sustainable investments. The hurdle is too high for the German fund association BVI because it can hardly be taken due to a lack of suitable investments. In order to prevent fraudulent labeling - so-called greenwashing - consumer advocates are calling for uniform standards and guidelines for "green" investments.