Preparations escalate for a monumental SEC fine concerning DWS's alleged greenwashing activities
DWS, a leading asset manager, is currently embroiled in an ongoing investigation by the U.S. Securities and Exchange Commission (SEC) over allegations of greenwashing. The SEC declined to comment on the matter, and DWS couldn't provide a comment on the time frame for the resolution.
The investigation centres around claims that DWS exaggerated the proportion of its assets that were ESG integrated in its 2020 annual report. This allegation has raised concerns about the transparency and accuracy of DWS's sustainability claims.
DWS's board is currently evaluating the compensation issue and is committed to fulfilling its legal obligations. The compensation for DWS's former CEO, Asoka Wöhrmann, is subject to the "possibility of clawback", according to DWS's statement in March. However, the exact amount of his outstanding remuneration is not specified in the search results.
Wöhrmann resigned after Frankfurt police raided DWS's offices in May 2022. His successor, Stefan Hoops, admitted that the asset manager's marketing may have been overly exuberant in the past. Hoops stated that an end to the probes would make it easier for DWS to engage with clients on sustainability and reduce the time spent on past issues.
DWS has set aside more than €20 million ($22.2 million) to settle allegations of greenwashing. The exact amount DWS has set aside for the settlement varies in reports, with some claiming €27 million and others €21 million. The SEC aims to resolve the DWS probe by the end of September with a fine, according to Reuters, but the exact amount and time frame for the resolution remain undisclosed.
The investigation into DWS is not limited to the SEC. The asset manager is also under investigation by the German financial regulator BaFin, the U.S. Justice Department, and Frankfurt prosecutors. This wide-ranging scrutiny underscores the seriousness of the allegations and the need for DWS to address them promptly and transparently.
In addition to the greenwashing allegations, DWS reported an additional €39 million in legal costs in late May, on top of the set-aside for settling greenwashing allegations. This added financial burden further emphasises the importance of a swift and satisfactory resolution to the ongoing investigations.
The SEC has previously imposed penalties on other financial institutions over greenwashing allegations. In May 2022, BNY Mellon was fined $1.5 million by the SEC, and Goldman Sachs saw a $4 million penalty from the regulator in November. The outcome of DWS's probe could set a precedent for future investigations and penalties related to greenwashing.
As the investigation continues, DWS will need to demonstrate its commitment to transparency, honesty, and ethical business practices. The resolution of these allegations will not only impact DWS's reputation but also set a standard for the entire financial industry moving forward.
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