Statements about DWS’ controls for incorporating ESG factors into research and investment recommendations for ESG integrated products were ‘materially misleading’, according to the Securities and Exchange Commission (SEC), resulting in a $19m fine for the firm.
An investigation by the SEC found that DWS marketed itself as a ‘leader’ in ESG that adhered to specific policies for integrating ESG considerations into its investments. However, from August 2018 until late 2021, DWS failed to adequately implement certain provisions of its global ESG integration policy as it has led clients and investors to believe it would.
The order also found that DWS failed to adopt and implement policies and procedures reasonably designed to ensure that its public statements about the ESG integrated products were accurate.
“Whether advertising how they incorporate ESG factors into investment recommendations or making any other representation that is material to investors, investment advisors must ensure that their action conform to their words,” said Sanjay Wadhwa, deputy director of the SEC’s division of enforcement and head of its climate and ESG taskforce.
“Here, DWS advertised that ESG was in its ‘DNA’, but, as the SEC’s order finds, its investment professionals failed to follow the ESG investment processes that it marketed.”
A DWS spokesperson told ESG Clarity the firm is pleased to have resolved this matter.
“The SEC ESG order, following an extensive two-year examination, finds no misstatements in relation to our financial disclosures or in the prospectuses of our funds. We have consistently stated that we stand by our financial disclosures and the disclosures in our fund prospectuses. The order also makes clear that the weaknesses identified by the SEC are in relation to processes and procedures that the firm has already taken steps to address.”
An investigation by the German financial regulator, BaFin, into allegations of greenwashing by DWS is still ongoing. Last year, officers raided the firms Frankfurt office, stating that “sufficient factual evidence has emerged” ESG factors were taken into account in a minority of investments “but were not taken into account at all in a large number of investments”, contrary to statements in DWS fund sales prospectuses.
