DoJ censures Deutsche Bank for late flagging of greenwashing claims

Deutsche Financial institution violated the phrases of a deferred prosecution settlement with the US Division of Justice final yr, within the newest run-in between Germany’s largest lender and America’s legislation enforcement authorities.

The financial institution broke the phrases of an settlement with the DOJ by failing to flag a whistleblower criticism about greenwashing allegations at its asset supervisor DWS in a well timed method.

Beneath a cope with the DOJ signed in 2021 — made as a part of a settlement into alleged bribery in addition to fraudulent and manipulative commodities buying and selling practices — Deutsche dedicated to report potential new authorized points as quickly because it discovered about them.

Deutsche disclosed its blunder on Friday in its annual report.

The DOJ discovered that the financial institution had violated the DPA “based mostly on premature reporting” of “sure allegations regarding environmental, social and governance (ESG)-related data” at DWS, Deutsche disclosed in its annual report.

As a sanction, mentioned the financial institution, the DOJ had prolonged “an present monitorship”. Deutsche warned traders that the DOJ “has reserved all rights to take additional motion concerning the 2021 DPA if it deems vital”.

Deutsche, DWS and the DOJ all declined to remark.

On the coronary heart of the matter are whistleblower allegations, raised in March 2021, of large-scale greenwashing at Deutsche’s asset administration arm DWS. The allegations have been made by DWS’ former head of sustainability Desiree Fixler shortly after she was fired in early 2021.

In an electronic mail despatched on March 17 to Karl von Rohr, Deutsche’s deputy chief government and DWS chair, she accused DWS of misrepresenting the way it used environmental, social and governance metrics to analyse corporations throughout its funding platform. DWS subsequently mandated PwC, which suggested the agency on ESG subjects, with an inner investigation into the criticism. PwC later dismissed all allegations.

Fixler’s allegations have been made public by the Wall Avenue Journal final August, after which the DOJ launched an investigation into the difficulty. Information in regards to the probe wiped €1bn from DWS’s market capitalisation in a day.

After Fixler’s departure, DWS ditched its controversial “good integration” ESG strategy that was on the coronary heart of her criticism. In its 2021 annual report, additionally revealed on Friday, DWS solely reported €115bn in “ESG belongings” for 2021 — 75 per cent lower than a yr earlier when it said that €459bn in belongings have been “ESG built-in”.

The “good integration” strategy “will stop to exist throughout 2022” and might be changed by a brand new, extra demanding framework based mostly on new EU guidelines, the DWS annual report mentioned.

“I identified in 2020 that good integration was a extremely flawed danger evaluation system that might trigger traders monetary hurt,” Fixler instructed the Monetary Instances on Friday.

In its 2020 annual report, DWS described “good integration” as certainly one of “the primary steps” on its street map to local weather neutrality, calling it a “new extra intensive overview course of for managing sustainability dangers”.

Fixler objected to DWS labelling funding methods as “ESG built-in” even when funds administration had mere entry to ESG information however determined to not use it. DWS rejected the greenwashing allegations and denies any wrongdoing. It has not booked any provisions which can be earmarked for the case.

An individual acquainted with DWS’s inner discussions mentioned that the adjustments have been made whatever the whistleblower criticism, however have been triggered by new EU regulation that was put in place after the asset supervisor launched its “good integration” strategy.

Extra reporting by Stefania Palma in Washington.