Resignation sparked by German police raids to investigate claims over mis-representation of ESG funds.
Asoka Woehrmann, Group CEO of DWS, has resigned following a raid by German police on the asset manager’s Frankfurt offices, in connection with accusations of fraud relating to its ESG funds.
Woehrmann, who had held the position since late 2018, will be replaced by Stefan Hoops, currently head of DWS parent Deutsche Bank’s corporate banking operations, from 10 June, according to a statement issued Wednesday.
Yesterday’s raids by German police follow action brought against the firm by the US Securities and Exchange Commission (SEC), relating to evidence provided by former Chief Sustainability Officer Desiree Fixler that DWS exaggerated the extent to which ESG principles were followed in funds marketed as sustainable.
The raids, on the headquarters of both DWS and Deutsche Bank, were sanctioned by German prosecutors over allegations of misleading investors.
The US SEC and Germany’s BaFin last year launched separate investigations into allegations made by Fixler that DWS was overstating its use of sustainable investing criteria.
Fixler said DWS had made misleading statements in its 2020 annual report by claiming that more than half the group’s US$900 billion in assets were invested using ESG criteria.
German prosecutors reportedly said the raid was “triggered by reports in the international and national media that DWS, when marketing so-called ‘green financial products’ had sold these financial products as ‘greener’ or ‘more sustainable’ than they actually were”, a practice known as greenwashing.
“After examination, sufficient factual evidence has emerged that, contrary to the statements made in the sales prospectuses of DWS funds, ESG factors . . . were not taken into account at all in a large number of investments,” the prosecutors’ office said, calling the potential wrongdoing “prospectus fraud”.
About 50 people were involved in the raid, including officials from BaFin, federal police and prosecutors from Frankfurt. The officers reportedly held meetings with DWS and Deutsche Bank staff until lunchtime.
Deutsche Bank, which owns just under 80% of DWS, is not accused of greenwashing, but its premises were raided because it still shares some IT systems and facilities with DWS.
DWS and Deutsche Bank said the asset manager has been cooperating with regulators and authorities so far and would continue to do so. Since the investigation began, DWS has been in contact with authorities and has provided data and electronic communications. DWS denies that it misled investors.
Regulators in multiple jurisdictions have pledged to clamp down on firms making exaggerated claims about the sustainability credentials of their products as they try to cash in on booming demand for ESG investing.
Last week the SEC said BNY Mellon Investment Adviser had paid US$1.5 million to resolve charges it misstated ESG investment policies for some mutual funds it managed.
The SEC has also recently proposed rule changes aimed at stamping out greenwashing, while ESMA (European Securities and Markets Authority) is working on a legal definition of greenwashing to underpin enforcement action.
This story includes reporting from our colleagues at Regulation Asia.