On the 31st of May, 2022, fifty prosecutors and police officers raided Deutsche Bank and its investment arm DWS in Frankfurt, Germany.
Not because of large-scale money laundering, or illegal payments. No. For the first time in history, a bank was raided because of greenwashing.
Desiree Fixler is an advocate for change and impact in the practice of ESG investing and sustainability. She is today a frequent media commentator and works as a senior advisor to financial institutions and nonprofits on ESG matters.
In 2020, American Desiree Fixler was appointed Group Sustainability Officer at DWS Group, with the responsibility of driving the firm’s overall sustainability strategy. DWS is one of the world’s leading asset managers, with over 800 billion euros of assets under management, and Desiree saw it as a dream job.
”With almost a trillion dollars to put to work, just imagine the impact we could have”, she thought.
In March 2021 DWS released its annual report, in which the company claimed it was a leader in the ESG market. According to the report, more than half of the company’s assets were meeting environmental, social and governance (ESG) criteria. This meant that a staggering €459 billion supposedly qualified as sustainable investments.
The company publicly boasted that ESG was at the heart of everything, and that all the assets had been run through a highly sophisticated AI-supported tracking system that identified ESG risks.
The stock market loved the announcement. The demand for ESG investment products was growing, and now DWS was displaying this amazingly large portfolio of verified green options.
There was only one problem.
It wasn’t true.
”The reality was that we weren’t aligned, and we did not have the systems in place to produce the right type of products. Internally, folks described the system as ’shit’”, Desiree Fixler says in an hour-long interview with the Planetary Business podcast. https://www.youtube.com/watch?v=86SQARcQoWM
She began investigating how the system actually worked, and then reported her findings – and a suggested action plan – to the management team. She expected them to sound the alarm and immediately start dealing with this huge problem. But what happened was … nothing.
”This was all fixable, and in my team, we were just waiting for the management to give us a green light on the action plan”, she says in the podcast.
But the green light was never turned on. Instead, one day before the annual report with the false ESG numbers was to be published – Desiree Fixler was suddenly fired. Since she had been rated A+ in terms of individual performance, she saw the sudden termination as retaliation for speaking up.
She felt that the whole situation was handled in a bad way, and therefore put together a five-page dossier which she sent to the chairman of the board. In it, she explained all the issues she had founded, and also that she believed she had been fired in retaliation for speaking up about these problems.
But the chairman did not act on the dossier either, and after being publicly smeared by her former employer in a major business newspaper, Desiree decided to fight back. Just a few days later she got a call from the US authorities, which had opened up an investigation against DWS and was now asking Desiree Fixler to become a voluntary witness in their investigation. Later on, the federal German financial supervisory authority, BaFin, opened up an investigation as well.
Deutsche Bank Tower in Frankfurt, Germany. Photo by cmophoto.net on Unsplash
In May the following year, DWS and the headquarters of its majority owner Deutsche Bank in Frankfurt, were raided by police and prosecutors, who later said in a statement that “sufficient factual evidence had emerged” that ESG factors ”were not taken into account at all in a large number of investments.” But that was not when Desiree felt she won her greatest victory. That happened two months earlier, in March, when DWS published its annual report for 2021. In the report, the company’s ESG assets under management had shrunk from €459 to €115 billion. ”They revised down their ESG assets under management by 75 percent. They also noted that they would no longer use their smart integration ESG framework. The two main things I called for, they did”, Desiree Fixler says in the podcast interview.
DWS is still being investigated by the BaFin, the Securities and Exchange Commission (SEC), and the Department of Justice in the US, for allegedly misrepresenting its ESG work. In October last year, a German Consumer group also decided to file a lawsuit against DWS over alleged greenwashing. DWS has rejected the allegations of greenwashing, and how the story ends remains to be seen. What we do know is that since the scandal broke, the CEO, COO, CIO, and the global head of communications have all left the company.
”At the end of the day this is a story about a colossal corporate governance failure, where the CEO and the management board made the decision to take the shortcut to present themselves as a savvier and more advanced ESG asset manager than they were in reality”, concludes Desiree Fixler, who was recently appointed to the Financial Conduct Authority’s ESG advisory committee of the UK.
Stefanie Hauer is the producer of the Planetary Business podcast. She says: ”This case demonstrates that we are not yet clear on how to define 'green'. We need a system of control to challenge the word 'sustainable'.”
The producer of the podcast, German Stefanie Hauer, is a corporate sustainability leader and ranked as one of the top sustainability voices on Linkedin. She feels this is a story that needs to be heard by many.
”Greenwashing used to be a PR issue. This case made clear that company managers can be held accountable. So also from a risk management point of view, corporate sustainability must be up high on the agenda. People need to understand what has actually happened, and to acknowledge that we need much higher standards for corporate governance to make sure this won’t happen again.
Stefanie Hauer also wants to highlight the fact that even though the CEO and several other persons in leading positions have had to leave DWS, the chairman is still at the high seat of the board.
”The people sitting on the boards need to be sensitive to what the planetary crisis is all about. They need to take responsibility for this, by admitting mistakes, taking serious action, and re-inventing their business models. There is no shortcut for true corporate sustainability.”
FACT BOX: LOW LEVEL OF CLIMATE EXPERTISE ON COMPANY BOARDS
- According to a study (from 2021) by the NYU Stern Centre for Sustainable Business, only 0,2 percent of the board members in the 100 largest US companies had specific climate expertise.
- To increase the knowledge among board members and CEOs about the climate crisis, We Don’t Have Time has previously organized Climate Board Training – How to future-proof your business.
