WSJ Hits Deutsche/DWS Over ESG
The Wall Street Journal writes that "U.S. Authorities Probing Deutsche Bank’s DWS Over Sustainability Claims." The article, which doesn't mention money market funds or the $570 million DWS ESG Liquidity Fund specifically, says, "U.S. authorities are investigating Deutsche Bank AG's asset-management arm, DWS Group, after the firm's former head of sustainability said it overstated how much it used sustainable investing criteria to manage its assets, according to people familiar with the matter. The probes, by the Securities and Exchange Commission and federal prosecutors, are in early stages, the people said. Authorities' examination of DWS comes after The Wall Street Journal reported that the $1 trillion asset manager overstated its sustainable-investing efforts. The Journal, citing documents and the firm's former sustainability chief, said the firm struggled with its strategy on environmental, social and governance investing and at times painted a rosier-than-reality picture to investors." The article tells us, "A spokesman for the U.S. attorney's office in Brooklyn, which is handling the probe, declined to comment. A spokesman for the SEC declined to comment. A DWS spokesman said the firm doesn't comment on questions related to litigation or regulatory matters. A spokesman for Deutsche Bank declined to comment. The Wall Street Journal reported earlier this month that DWS told investors that ESG concerns are at the heart of everything it does and that its ESG standards are above the industry average. But it has struggled to define and implement an ESG strategy, according to its former sustainability chief and internal emails and presentations.... DWS said in its 2020 annual report released in March that more than half of its $900 billion in assets at the time were invested using a system where companies are graded based on ESG criteria. An internal assessment done a month earlier said only a fraction of the investment platform applied the process, called ESG integration. The assessment added there was no quantifiable or verifiable ESG-integration for key asset classes at DWS. Desiree Fixler, at the time DWS's sustainability chief, told the Journal that she believed DWS misrepresented its ESG capabilities." The Journal piece adds, "A DWS spokesman said the firm stood by its annual report and that an investigation by a third-party firm found no substance to Ms. Fixler's allegations. He said standards for defining ESG assets are constantly evolving, and that DWS has been seen by the market as being more conservative than most of its competitors in the definition. ESG has become a huge business for asset managers. Assets in ESG funds surpassed $2 trillion globally in the second quarter, almost tripling in three years, according to Morningstar. Regulators say they may require advisers to disclose more about the criteria and data they use to pick ESG investments." Crane Data currently tracks 28 Social, ESG, Minority or Veteran-affiliated MMFs with $64.5 billion (as of 7/31/21), representing 1.3% of the total $4.8 trillion in taxable MMFs. (For more on ESG and MMFs, see our August 19 News, "BlackRock Expands ESG Lineup; Files for New Bancroft, Cabrera Shares.")
