Investing money and feeling good about it has never been easier – at least if you believe the sayings of the financial industry. With “sustainability megatrend” funds, companies are advertising investor money like there is no tomorrow, and they are launching new “green” funds almost every hour. Those who move their money into sustainable investment funds fighting climate change, inequality and supporting innovative green products are tempting. And yes, who doesn’t want that?
The DWS fund company has also promised. She even wanted to put herself at the forefront of the ESG movement. ESG stands for Environment, Social and Governance. It is about investing in companies that are particularly environmentally and socially harmless and well managed. DWS boss Asoka Wöhrmann recently congratulated himself: Soon after, the announcement came that from 2021 every new securities fund would be ESG. Within the company, however, several executives had long warned that one was visually much greener than the other. In reality, only “a small portion” of funds are truly ESG.
The arrogance of the Deutsche Bank subsidiary is now getting full revenge and that’s a good thing: the former head of sustainable development at DWS has just publicly criticized her ex-bosses for having completely concealed his ex-bosses with the green drum of marketing and thus deceived investors. . When it became known on Thursday that US authorities were handling the case, DWS’s share price plummeted by nearly 13%. A billion in market value vanished in a matter of hours.
There would be no room for the Frankfurt fund company: DWS found itself in this situation recklessly and through its own fault. There are also no mitigating circumstances to ensure that everyone does what they want in the absence of adequate ESG standards. DWS boss Wöhrmann was also familiar with the criticisms of his employees. Anyone who has tricked their fund investors into scrutinizing companies carefully for sustainability criteria, but then doing it at most superficially, will cause damage. Firstly, because unsuspecting investors are drawn into new so-called green and sometimes even more expensive funds. Second, because too much capital is still flowing into climate-damaging companies. The fight against climate change can only be successful if the money is channeled to the right companies, not to climate-damaging or windy business models.
Based on their supposedly unique ESG database, fund managers DWS, for example, had invested heavily in fraud firm Wirecard by the end of 2019, even with an ESG fund. The internal data machine had given the DAX Group the second highest rating in the “Business Ethics” category until spring 2020 – at a time when Wirecard board member Jan Marsalek was probably already planning his escape and special auditors were looking for company numbers. substance. Anyone with such ESG data no longer needs hostile competition.
Ideally, however, the DWS cause will now become a red flag for the entire industry. Asset managers urgently need to take a step back in marketing their products. You have to admit that it is anything but trivial to test the sustainability of a business, that it needs knowledge and resources to examine business models and supply chains.
All other fund companies today must fear that sooner or later it will come out if they cheat on the ESG subject. The financial supervisor, in turn, needs to formulate clear standards and then seriously consider them. Especially, if what is on the label is also there. It owes it to investors, who are usually overwhelmed by it. The hope is that supervisors around the world won’t want to be accused of failing to carefully consider one of the most important political questions of the times.