SEC Cracks Down on Deutsche Bank’s DWS for False ESG Claims, Imposes $25 Million Fine

In a significant setback for the credibility of ESG investments, the SEC has taken legal action against DWS Investment Management Americas Inc., a subsidiary of Deutsche Bank, for alleged false claims in relation to Environmental, Social, and Governance (ESG) practices. The charges against DWS are twofold: first, for failing to establish a proper Anti-Money Laundering (AML) program for its mutual funds, violating legal obligations, and second, for making misleading statements about its ESG investment strategies.

Despite trillions of dollars pouring into ESG-focused investments, critics have long suspected that some asset managers have been using ESG as a marketing tactic, channelling funds into conventional investments while professing support for socially responsible causes.

The SEC’s investigation revealed that DWS had exaggerated its incorporation of ESG factors into investment decisions. Despite presenting itself as an ESG leader with stringent policies, the company allegedly failed to fully implement these policies between August 2018 and late 2021, contrary to the expectations of its clients and investors.

DWS, a Deutsche Bank subsidiary, has been fined a total of $25 million in response to these charges.  Sanjay Wadhwa, Deputy Director of the SEC’s Division of Enforcement, emphasised the vital need for integrity in the investment industry. He stressed the importance of investment advisers aligning their actions with their stated principles, particularly in significant areas such as ESG considerations.