ESG mis-selling in Germany

In Summer 2021 the former Group Sustainability Officer at DWS Group, an asset manager, blew the whistle on her former employer in an interview with the Wall Street Journal, stating that the ESG properties of its products had been significantly overstated.

In May 2022 agents of the state prosecutor, federal police, and the financial market authority BaFin, raided the DWS headquarters in Frankfurt. The prosecutor’s office stated that a preliminary investigation had hardened initial suspicion that ESG criteria had been observed only in a minority of investments in contradiction to statements made in the products’ prospectuses. The state prosecutor is now officially investigating DWS concerning possible investment fraud but has not filed formal charges yet.

In October 2022, the consumer organization of Baden-Württemberg has sued DWS over false advertising regarding its ESG-fund “DWS Invest ESG Climate Tech Fonds”. In the promotional material for this product, the provider assures consumers that no money would be invested in certain controversial sectors like coal or weapons while up to 14.99% of assets may be of these industries. This civil case is pending.

Greenwashing of retail investment products is increasingly becoming a major issue for financial consumer protection. BEUC will update this article as the civil and potential criminal cases develop.