DWS closes in on settlement over greenwashing scandal

DWS is braced to pay €21mn to regulators as Germany’s largest asset manager tries to draw a line under multiple investigations into a greenwashing scandal that has dogged the group for more than two years.

The company disclosed on Wednesday that it had made a provision of €21mn, the bulk of which is earmarked for US authorities, who have been probing claims that DWS overstated the share of its assets that were invested using environmental, social and governance criteria.

In its half-year report, DWS said it was in “advanced resolution discussions” with the US Securities and Exchange Commission to “resolve their ESG investigation”. DWS stressed that “the final outcome is yet to be concluded”, but a person familiar with the talks said the company now had enough clarity to quantify the likely financial hit from a settlement that it expected to agree soon.

The €21mn, which was revealed alongside the group’s latest results, comes on top of €39mn in legal costs that DWS disclosed in late May.

The asset manager, which is 80 per cent owned by Deutsche Bank, has been under investigation by the US Securities and Exchange Commission, German financial watchdog BaFin and Frankfurt criminal prosecutors over allegations made by former DWS employee Desirée Fixler.

According to Fixler, DWS made misleading statements in its 2020 annual report over the size of its ESG assets. The former executive also claimed she was fired after informally raising her concerns internally and subsequently filed a formal whistleblower complaint.

Deutsche Bank was later censured by the US Department of Justice for filing Fixler’s whistleblower complaint too late, thereby breaching the terms of a deferred prosecution agreement.

In May last year, German police raided DWS and Deutsche Bank as part of the probe. DWS has denied any wrongdoing but has changed its ESG criteria since Fixler’s allegations.

When the SEC investigation was disclosed in August 2021, the group’s share price plunged 15 per cent in a day, wiping €1.1bn from its market capitalisation. The shares remain 29 per cent below their 2021 peak.

DWS chief executive Stefan Hoops stressed on Wednesday that the company stood by how it reported its ESG assets and the prospectuses for relevant funds but acknowledged that the asset manager’s marketing “may have been overly exuberant” in the past.

Hoops’s predecessor, Asoka Wöhrmann, resigned a day after the police raid but is entitled to a payout of €13.7mn, including €8.15mn in severance pay and his salary for last year. DWS said in March that the severance package was subject to the “possibility of clawback”.

Hoops declined to comment on potential clawbacks. DWS told the Financial Times that its supervisory board would evaluate the matter as it “will of course fulfil its legal obligations”.

Hoops is hoping a settlement with authorities will allow DWS to focus on growing its assets under management. The company is seeking to expand its share of alternative assets, including property and infrastructure — an ambition buoyed during the second quarter after it won a $4bn US real estate mandate.

Its exchange traded funds also recorded inflows during the quarter, driving the group’s overall assets under management to €859bn by the end of the second quarter, up from €841bn at the end of March.

DWS said its revenues in the second quarter stood at €668mn, little changed from the same quarter a year ago, while costs rose by 5.7 per cent to €467mn.