ESG Regulatory Heat Intensifies With Latest Raid In DWS

Around 50 German police officers intruded the Frankfurt office of fund manager DWS in May amid a greenwashing probe, the Financial Times reports.

DWS CEO Asoka Woehrmann resigned the day after the police arrived to question the staff. The firm invited global regulatory scrutiny after a former executive turned whistleblower Desiree Fixler accused the firm of greenwashing.

Former BlackRock sustainability executive alleged that ESG investing was little more than "marketing hype." DWS modified Environmental, Social, and Governance criteria and denied misconduct since Fixler went public.

"There's nothing to suggest DWS is a one-off," said a partner at legal firm Pallas. "I think it's almost inevitable litigation will be brought in lots of different jurisdictions."

However, Stuart Kirk, HSBC's head of responsible investing, claimed central banks and policymakers had exaggerated the financial risks of climate change.

The SEC disclosed its first case against an investment firm over alleged ESG misdeed in May, with BNY Mellon's investment arm agreeing to pay $1.5 million to settle charges. The SEC proposed new rules on labeling and disclosure for ESG funds two days later.

Global regulators have tightened provisions since the SEC prioritized exposing overstated ESG performance and advertising claims by investors.

The SEC sought appropriate disclosures for seeking ESG funds. The SEC also investigated Goldman Sachs's asset management division over specific ESG claims made by its funds. The SEC aimed to monitor proxy voting behavior, and ESG funds voted consistently for ESG transparency.

In Europe, German, Dutch and French authorities have issued additional ESG labeling requirements on top of EU bloc-wide disclosure rules. 

In related news, Tesla, Inc TSLA bull Cathie Wood criticized the EV maker's removal from the S&P 500's ESG Index, while its CEO Elon Musk called ESG ratings a "scam." Musk's tweets on ESG and politics may have wiped off $12.3 billion from his net worth.

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