Date: 28th September 2023

DWS, a German asset manager, has settled with the U.S. Securities and Exchange Commission (SEC) for $19 million. This settlement is over greenwashing allegations and is the SEC's highest penalty related to environmental, social, and governance (ESG) criteria against an investment adviser. An additional $6 million penalty was imposed for anti-money laundering violations, totaling $25 million in penalties. The SEC's allegations focused on misleading statements about DWS's ESG assets and controls, following a whistleblower complaint from Desiree Fixler, the company’s former head of ESG. DWS has not admitted guilt but is relieved to have resolved the matter and says it has addressed the SEC's identified weaknesses.

This case is part of broader SEC efforts, led by chair Gary Gensler, to scrutinise Wall Street’s ESG policies more intensely and prevent misleading ESG statements. The revelation of the SEC investigation significantly impacted DWS’s stock value and led to leadership changes, including the ousting of former CEO, Asoka Wöhrmann.

This decision was made amid an international push for enhanced transparency in ESG ratings. In the EU, the European Commission has put forth a draft Regulation on ESG Ratings to address conflicts of interest, ensure transparency, and establish a system for the supervision and authorisation of ESG rating providers. However, the current ESG regulatory framework has yet to fully achieve its goals. Enhanced protective measures for retail investors against greenwashing, the establishment of a minimum standard for ESG ratings, and clear labels showing rating origins and payers are imperative. Implementing these measures would harmonise EU regulations on ESG, promoting transparency and efficiency and averting instances like the one encountered in the US.

➡ Read the full Financial Times article here.