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By Omar Mohammed
Reporter, Economy & Finance
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DWS Investment Management Americas, an asset manager subsidiary of Deutsche Bank, has been fined $19 million for misstating its environmental, social, and governance (ESG) investment process, the Securities and Exchange Commission said on Monday.
The SEC claimed that, from August 2018 to late 2021, DWS marketed that it had integrated ESG in the way it makes investment decisions. But, the regulator argued, the firm had failed to implement some of the provisions to its ESG integrated products contrary to what it led clients and investors to believe.
"DWS advertised that ESG was in its 'DNA,' but, as the SEC's order finds, its investment professionals failed to follow the ESG investment processes that it marketed," said Sanjay Wadhwa, Deputy Director of the SEC's Division of Enforcement and head of its Climate and ESG Task Force.
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Proponents of ESG argue these are important factors that can impact an investment's long-term value, while others have described them as "woke ideologies." Some companies and organizations that have failed to live up to their ESG credentials have been accused of greenwashing.
The regulator also said that from January 2017 to the end of 2021 while DWS mutual fund's business had instituted an "umbrella" anti-money laundering program designed for its different entities, it did not incorporate specific compliance requirements for its mutual fund business.
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On the anti-money laundering violation, DWS failed to establish a program to detect money laundering, the SEC said.
"The SEC's order finds that DWS advised mutual funds with billions of dollars in assets yet failed to ensure that the funds had an AML program tailored to their specific risks, as required by law," said Gurbir S. Grewal, Director of the SEC's Division of Enforcement.
In response, DWS settled the charges and agreed to fork over $6 million for the anti-laundering transgression. The company did not admit nor deny the charges but agreed on a cease and desist orders on both counts and additional censure on the ESG infringement.
In a statement to Newsweek, DWS said that the SEC ESG order had found no "misstatements in relation to our financial disclosures or in the prospectuses of our funds."
"The Order also makes clear that the weaknesses identified by the SEC are in relation to processes and procedures that the firm has already taken steps to address. We are pleased to have resolved these matters," the company added.
The case represents the biggest settlement the SEC has managed to reach since the regulator began to clampdown on the way firms represent their ESG businesses, according to Bloomberg.
Update 9/25/23, 11:41 a.m. ET: This story has been updated to include a statement from DWS Investment Management Americas, added context and a new headline.
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