How companies trick investors with their ESG scores --- The case of the DWS company and Deutsche Bank
On May 31, 2022, the offices of the German asset manager company DWS and its majority owner Deutsche Bank were raided by German police for allegedly misleading investors about ESG factors in their financial products. According to the prosecutor's office, ESG factors were not taken into account at all in many investments, contrary to what was stated in the prospectuses of the funds offered by DWS, something that can be considered prospectus fraud.?
According to Desiree Fixler, who was once the company's global head of sustainability, DWS's ESG risk management system is seriously flawed. After Fixler submitted a report to the DWS management board, the ESG criteria of the company were updated, and in its 2021 annual report, DWS reported only €115bn in “ESG assets” for 2021 —75 percent less than a year earlier when €459bn in assets were stated to be “ESG integrated”.?
In the field of investment management, greenwashing has long been a controversial issue. Asset managers often claim that their financial products are more environmentally friendly and sustainable than they actually are, in order to convince investors to buy their financial products. A reason for this phenomenon is that ESG analysis traditionally has been difficult and costly to do correctly. Asset managers simply don’t take the time to faithfully collect and assess ESG data when investing, so many of them loosen their standards related to ESG analysis, turning the ESG rating system into a marketing tool. Due to this, a great number of unethical or even law-breaking tricks have been used to cover up bad performance in the ESG field.????
In a complex world where ESG factors are becoming ever more relevant in investing, it is crucial for fund managers to conduct proper ESG research, so that responsible investors are able to put their money into companies contributing to a better world and society. In the case of DWS, their situation could have been avoided if they had worked proactively and holistically with their ESG analysis, for example by using our products. Our AI algorithm and NLP technology extract ESG related information from more news sources than humanly possible to handle, and gravely simplify the process of screening companies prior to investing as well as continuously monitor them as a part of your portfolio. With our technology readily available at arms-length, companies can cut the number of hours and resources needed to perform proper ESG analysis. Moreover, investors that never had resources comparable to giants such as DWS to spend on manual ESG analysis are now able to do perform a proper ESG analysis thanks to our new technology. There are simply now excuses left, sustainable investing for real is possible!??
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Erik Dahlberg