The departure of a chief executive officer amid allegations of greenwashing marks a turning point for an industry that this year ballooned to more than $40 trillion.
After pegging his career to ESG, the CEO of DWS Group, Asoka Woehrmann, resigned hours after the asset manager’s offices were raided by police looking for evidence of misleading claims around environmental, social and governance investments. DWS is still being investigated in the U.S. and Germany.
“This is a very historic thing that’s happening,” said Sasja Beslik, chief investment officer at NextGen ESG and the author of “Where the Money Tree Grows.” It’s going to send “shock waves across the asset-management industry, specifically targeting senior management because they ultimately approve all of it.”
The development at DWS, which has consistently denied allegations of greenwashing, represents the most compelling signal yet from European regulators that they’ll no longer tolerate puffed up ESG claims. It also coincides with signs of growing cynicism around the role of ESG and the ways in which it’s being peddled. What’s more, the departure of Woehrmann—once viewed as a star performer—has fund managers across Europe wondering whether they might also be in the crosshairs, according to Beslik.
“What happened at DWS is going to push asset managers to be much more careful about the things they’re saying,” he said. “You will see a lot of discussion in meeting rooms across asset managers this morning. They’ll be wanting to make sure that they can actually back up their ESG statements.”
What Bloomberg Intelligence Says
“There’s a significant negative readacross for all asset managers facing mounting costs and tempted to cut corners from the resignation of DWS CEO Asoka Woehrmann following a police raid investigating the inflation of its ESG credentials or greenwashing,” said Bloomberg’s Kevin Ryan and Lento Tang. “Costs of ESG investing are increasing and being borne by European asset managers’ profit and loss accounts rather than clients, contrary to U.S. practices.”
For many asset managers, backing up ESG claims is becoming an increasingly fraught undertaking. That’s as some European regulators start to question the quality of the rules the industry needs to follow. According to the national regulator of France, holes in the EU’s landmark ESG rulebook—the Sustainable Finance Disclosure Regulation—almost invite greenwashing.
Robert Ophele, the head of the French financial supervisory authority, said there’s no guarantee that SFDR actually leads to sustainable investment products. He points to the two main fund categories within SFDR, known as Article 8 (light green) and Article 9 (dark green).
“When it comes to the categorization of products, we have indeed a problem due to the catch-all nature of the Article 8 product category, but which is also present for the Article 9,” Ophele said in an interview. “It fuels greenwashing all the more.”