SEC Vs. DWS - An Investigation That May Impact The Global Investment Industry

When the Wall Street Journal published an article about the SEC’s investigation into a possible overstated declaration on the efforts to integrate ESG criteria at German asset manager DWS Group in August 2021, many market observers had to catch their breath. This is because the case could have consequences for the overall fund management industry that are not immediately apparent.

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The investigation is based on claims by the former head of sustainability at DWS, who alleged in an interview with the Wall Street Journal that the asset manager overstates how the firm uses sustainable investing criteria to manage its investments.

That said, there is so far no proof that these claims are right, and every suspect has to be assumed to be not guilty as long as there is no formal proof of guilt.

Nevertheless, this investigation could send shockwaves through the global investment industry since I would assume that DWS is using the same methods to determine its ESG-related assets as other asset managers. This would mean that the outcome from this trial would have consequences for all other asset managers who have ESG-related funds registered for sale in the US. In addition, this investigation could become a landmark for other market regulators who may start their own investigations with regards to misleading information and/or on the integration of ESG criteria in portfolio management practices. Such investigations would raise concerns at asset managers around the globe, who are often trying to make their ESG policies fit with definitions that are often vague, contradictory, or quite simply absent.

I totally agree that greenwashing needs to be penalized. This is especially true for asset managers who are claiming in their marketing material that they might use ESG criteria but don’t integrate the respective criteria and data as mandatory filters and additional information in their securities selection and portfolio management process.

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