July 31, 2023

DWS discloses ESG investigations by US and German authorities

In its half-year report issued on July 26, 2023, the German company DWS Group GmbH & Co. KGaA disclosed two ongoing investigation into the company’s practices in the environmental, social, and governance arena.

The first of these two investigations was launched in May 2022 by the Public Prosecutor’s office in Frankfurt, where the company is headquartered.  DWS states in the interim report that it is continuing to provide information and cooperate in this investigation; it has not disclosed whether a provision or contingent liability has been established in connection with the matter, in order not to prejudice the outcome.

The second investigation is being conducted by the US Securities and Exchange Commission.  According to DWS, the parties are engaged in advanced resolution discussions, although the final outcome is not yet known. In March 2022, the perceived overstatement by DWS of its investments in ESG initiatives, and the failure of its parent company, Deutsche Bank, to promptly report a whistleblower complaint flagging the greenwashing, caused the US Department of Justice to extend by nearly a year the monitorship imposed on the bank pursuant to a deferred prosecution agreement entered into in January 2021.

Worldwide, regulatory authorities are developing programs to check unsubstantiated ESG claims, to empower consumers, and to foster transparency.  In March 2023, for example, the European Commission, published a proposal for a “Green Claims Directive” on the substantiation and communication of explicit environmental claims.  The proposed directive aims to standardize sustainability claims and make them verifiable across the European Union.  It is designed to complement the existing regulatory framework, and to incorporate approved labeling schemes and programs currently in use.  An overview of the new proposal is available here.

Interim Report 2023