(PresidentialHill.com)- On Tuesday, German authorities raided asset management DWS and its majority owner Deutsche Bank’s offices on charges of deceiving investors about “green” investments, according to the prosecutors.
According to reports, prosecutors said they were investigating press stories and a whistleblower’s claims that DWS misrepresented investments as being “greener” or “more sustainable” than they were, a tactic known as “greenwashing.”
DWS has disputed charges that it deceived investors on many occasions.
DWS and Deutsche Bank stated that the asset management has previously worked with regulators and authorities and would continue to do so in the future.
According to German prosecutors, environmental, social, and governance (ESG) aspects were considered in a minority of investments but were not taken into account at all in a vast number of transactions. This contradicts assertions in DWS fund sales prospectuses.
Separate investigations were started into the “greenwashing” last year by the Securities and Exchange Commission and the German financial watchdog BaFin. Reports show that the accusations made by DWS’ former head of sustainability alleged that the business was overstating how it employed sustainable investing criteria to manage assets. The German prosecutors’ announcement was the first time they had officially stated that they were working on the case.
Business-related media outlets show that as corporations strive to cash in on the rising demand for ESG investment, regulators and legislators have promised to crack down on companies making inflated claims about their goods’ sustainable credentials. Although watchdogs are beginning to tighten the screws, there has been little enforcement.
Last week, the Securities and Exchange Commission said that BNY Mellon Investing Adviser had paid $1.5 million to settle claims that it misrepresented ESG investment practices for several mutual funds it managed. The Securities and Exchange Commission has suggested two rule amendments targeted at combating false ESG fund claims, while the European Union’s markets watchdog is working on a legal definition of “greenwashing” to support enforcement action.
Fund managers have acquired billions of dollars in assets with an environmental or social character, generating increased scrutiny of how companies define and implement ESG principles. ESG claims are monitored across the banking industry.