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DWS, a subsidiary of Deutsche Bank, said its offices were raided by German police last week, as panellists in Vienna agreed that environmental, social and governance (ESG) issues are a priority for employees.
ESG issues have continued to wreak havoc for financial institution employees last week when Asoka Woehrmann, DWS chief executive, handed in his resignation after a police raid.
According to statements that have been released by the Frankfurt prosecutor’s office, the search had been triggered by reports in the press that the financial institution, which began to operate separately from Deutsche Bank in 2018, overstated the green or sustainability-related aspects of financial product. Following the examination of evidence, this has lead to a suspicion of “prospectus fraud.”
The former head of sustainability at DWS, Desiree Fixler, was fired last year after she warned that the company had made misleading statements in its 2020 annual report.
Here, it was stated that more than half the firm’s $900bn in assets under management were invested under ESG criteria.
The German authorities’ enquiries come just weeks after the US Securities and Exchange Commission fined BNY Mellon $1.5m for misleading statements and omissions about ESG considerations in making investment decisions for certain mutual funds that it managed.
ESG is considered more and more of a driving factor for financial employees’ interest in and loyalty to a company as well.
At EBADay 2022, which took place in Vienna, one panel discussing ESG agreed that it is no longer something that can be considered as just a desirable goal for firms.
ESG has gone from a "nice to have" to a compliance issue, said Kalliopi Chioti, chief ESG officer at Temenos, the software company.
“This shows that the trend is evolving. You need to be transparent, you need to go out there and say that you don’t have the solutions,” she advised, suggesting that companies need to be honest if they do not know how to approach the issue.
ESG is an issue that Temenos is working closely with their clients on, she said, pointing to the fact that many banks want to improve their carbon footprint.
“The key is not to do greenwashing, as this will come back and haunt you,” she cautioned. “Be open and say that this is a priority, and we won’t do these kinds of things. We have seen what has happened with Deutsche Bank and DWS.”
This may also become an employability issue for banks, the panel agreed, pointing out that a new generation of employees at financial institutions wants to see their company setting a high bar for ESG matters.
“We have the newer generation, especially the millennials right now, who are into sustainable banking. They look for the environmental and social credentials of a bank,” said Chioti.
Institutions need to sit back and think, she advised. “Banks need to remember that this is not operating in a vacuum, they are operating in a society, and banks and financial institutions have to mirror the society in order for them to be sustainable in the long term.”
We are seeing younger people speak up about these issues and call for specific directions, she continued.
Chioti’s fellow panellist, Gökhan Nazenin, a senior growth advisor at FIS, agreed.
“The next generation is keen to see us leave behind a world when we are gone,” he said.
Older generations have to leave a great planet, as well as make a profit, he said, adding that corporates need to lead by example.
An issue that may not have left consumers nor those looking for a career in the financial industry particularly hopeful recently was an intervention from Stuart Kirk, the now suspended global head of responsible investments at HSBC.
Kirk triggered international headlines when he accused central bankers and other officials of exaggerating the risks related to climate change.
"There's always some nut job telling me about the end of the world,” he quipped, as well as mocking rising sea levels.
His comments prompted an intervention from the bank’s chief executive, who said that did not agree “at all” with the comments.
