Frankfurt investigators on Tuesday raided Deutsche Bank and the nearby offices of asset management arm DWS. The suspicion is that DWS is guilty of so-called «greenwashing». It is alleged that the asset manager systematically exaggerated the sustainable nature of its products.
This is what German media, such as Handelsblatt, reported. To the business newspaper, the public prosecutor in Frankfurt confirmed that 50 officials of supervisor Bafin and the public prosecutor’s office entered the bank. A spokeswoman stated that the investigation against Deutsche Bank and DWS has been ongoing since the beginning of this year. The exact nature of the suspicion was not disclosed.
“For the sake of clarity, the raid by German justice officials has nothing to do with and no consequences for the activities of Deutsche Bank Belgium, which engages in wealth management and private banking activities,” said Deutsche Bank Belgium spokesman Jean-Michel Segers.
DWS rejected allegations
In August 2021, DWS was first confronted with such accusations by Desiree Fixler, its former head of sustainability. At the time, these accusations were seized upon by both Germany and the United States for further investigation. In a statement on 26 August 2021, DWS strongly rejected Fixler’s accusations. The house then pointed out that its ambition is to become a “leading ESG asset manager”.
Deutsche Bank shares, as well as the DWS share in which the bank has a majority stake, plunged more than 4 percent on Tuesday. But in the course of the day the price recovered.
The search of the Frankfurt office is bitter for Asoka Wöhrmann, the top executive of DWS, who has recently put a lot of effort into getting the asset management branch on track after a difficult period.
Wöhrmann was previously chief investment officer at the asset manager and participated several times in the Investment Summit that Investment Officer - at the time still called Fondsnieuws - organised with the investment strategists of three fund houses in Amsterdam. Handelsblatt writes that it is investigated whether Wöhrmann used private email to share business information. That is not allowed according to the rules.
In April, Deutsche Bank also had its head office searched. This had to do with the suspicion of the Public Prosecutor’s Office and supervisory authority Bafin that the large bank had failed to combat money laundering - reproaches that Dutch large banks have also had in recent years. It is not clear whether this suspicion still stands.
Raising the bar
The bar in terms of sustainability criteria is being raised at a rapid pace. Various voices in the sector are calling for this. According to Levi Sarens, head of asset management funds at Nagelmackers, Article 8 under the new SFDR legislation will become the lower limit for talking about a sustainable product, and the stricter Article 9 will become the standard for talking about truly ‹green› products and investment funds. He stated this in an interview with Investment Officer in September 2021.
Sarens said there is a strong rush to “scale up”’funds towards Article 8 or 9 labelled products - under the SFDR legislation - where the exact reason for this was much less clear six months ago. Many parties are therefore now catching up with Article 8, which will become the lower limit for being able to speak of a sustainable product.
Gradually, the bar will be set higher and higher, and only from Article 9 onwards will it be possible to speak of a truly sustainable product. Within the MiFID story, in time, Article 8 in itself will become insufficient to be able to speak of a sustainable product. A kind of “Article 8 plus”’will be required, probably to be linked to the Principal Adverse Impact (PAI) reports on which data must be recorded and subsequently reported from 2022 onwards,” said Sarens.
Principal Adverse Impact reporting
Sarens concludes that you will have to demonstrate an explicit sustainable activity. According to him, the Article 9 funds will evolve more towards purely thematic funds that, for example, focus on gender equality, water funds, and so on. Principal Adverse Impact reporting is in full development, and data suppliers such as MSCI and Sustainalytics are currently busy collecting the necessary data.
The Belgian “Towards Sustainability” label is also becoming increasingly strict, so that some parties are even opting out. This was the conclusion of a recent interview with Tom Van den Berghe, managing director of the Central Label Agency, the non-profit organisation that manages the label.
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