Deutsche Bank's DWS replaces CEO after police raid in greenwashing probe

Deutsche Bank’s embattled DWS Group chief executive officer Asoka Woehrmann resigned hours after a police raid at the asset manager, the culmination of months of controversy surrounding the executive.

Stefan Hoops, head of the German lender’s corporate bank, will assume the top role at DWS from June 10, according to a statement on Wednesday (June 1). His previous role will be assumed by David Lynne, who leads the corporate bank for Asia-Pacific based in Singapore. 

The departure of one of Deutsche Bank CEO Christian Sewing’s former close allies underscores the rising pressure since former DWS chief sustainability officer Desiree Fixler’s allegations that the company inflated its ESG credentials. The raids add to a rising list of regulatory and legal headaches for Mr Sewing, after law officials swooped into both firms in Frankfurt on Tuesday.

The greenwashing probes also underscore the growing scrutiny of money managers as global demand for environmental, social and governance (ESG) investments soars. Assets tied to ESG issues are expected to surge to more than US$50 trillion (S$68.6 trillion) by 2025, according to estimates from Bloomberg Intelligence.

Asset managers, especially those operating in markets such as Europe and the US, need to make sure they can support their ESG claims given regulators’ scrutiny of greenwashing,” said Mak Yuen Teen, a professor at the National University of Singapore who researches corporate governance.

The ESG industry has recently faced attacks from a growing chorus of detractors, and even insiders are starting to air their doubts around aspects of the booming investing form.

Mr Jim Whittington, head of responsible investment at Dimensional Fund Advisors with about US$660 billion of assets under management, said the industry is struggling both in terms of real-world impact and returns. Any “promise that you can outperform the market by your insight and evaluating ESG risks probably isn’t going to stack up”, he said in a recent interview.

HSBC Holdings’ asset management unit recently suspended its head of responsible investment after he questioned the sense of focusing on climate change. In the US meanwhile, Republicans have identified ESG as a target in their culture wars, while Tesla’s Elon Musk has called ESG a “scam”.

The US Securities and Exchange Commission floated tighter rules on Wednesday to ensure a product’s name is squarely focused on its actual strategy, with most observers fixating on what the restrictions mean for socially responsible investing. The proposals could hit thousands more funds trading everything from value and growth stocks to bonds and emerging markets.

Misleading claims

Ms Fixler has said that DWS’s claims that hundreds of billions of its assets under management were “ESG integrated” were misleading because the label didn’t translate into meaningful action by relevant fund managers. DWS has since stopped using the label.

Still, ESG assets have continued to pour into the bank. DWS funds saw record net inflows of 48 billion euros (S$70.6 billion) in 2021, with ESG products accounting for 40 per cent of the total, according to a press release. 

The DWS case sends “a strong signal that ESG can’t be just empty rhetoric but should be something deliverable,” said Kang Jun-koo, a finance professor at Nanyang Technological University in Singapore who does corporate governance research. 

Source: The Straits Times