The case has the makings of the next big financial scandal, and it casts a dark shadow over the booming business with green investments. It involves DWS, the Deutsche Bank subsidiary that is Germany’s largest asset manager and a self-proclaimed pioneer in sustainable, climate-friendly equity funds.
The former head of sustainability at DWS, Desiree Fixler, had to leave the company under strange circumstances in March 2021, after just a bit more than half a year on the job. Since then, she has been battling her former employer in labor court. More serious, however, are the accusations Fixler, who is from the U.S., has made against DWS and, especially, against CEO Asoka Wöhrmann. The company, says Fixler, has massively overinflated its public image and presented itself as far "greener" than was appropriate for its investment policy.
In a statement released last Thursday, DWS said: "We firmly reject the allegations being made by a former employee.” The company added that it "will continue to remain a steadfast proponent” of green investments. In the meantime, though, financial supervisory authorities in Germany have begun investigating. As have the authorities in the U.S., which have been keeping close tabs on Deutsche Bank in recent years due to an extended series of scandals in which the bank has been involved.
More than anything, though, the drama is taking place amid the hype surrounding "ESG" investments. The acronym stands for Environmental, Social and Governance, and refers to investments in companies that operate in an environmentally and socially sustainable manner and which are well managed and appropriately monitored by their supervisory boards. In recent years, trillions of dollars have flowed into ESG-compatible funds as climate change has led many investors to take a closer look at where their money is going.
That explains why Fixler’s accusations are so explosive. Not only did she get an inside look at DWS, but she has a deep understanding of the industry as a whole – resulting in a tarnishing of its "green” nimbus. Her interview with DER SPIEGEL marks the first time she has spoken out on the case that is currently dominating the financial headlines.
DER SPIEGEL: Ms. Fixler, you have accused your former employer of deceiving investors, alleging that DWS puts far less money into ESG-compatible investments than it claims publicly. That is quite a serious allegation. Where does it come from?
Desiree Fixler was head of sustainability at the investment firm DWS, a subsidiary of Deutsche Bank, until spring of 2021. Prior to that position, she had amassed 25 years of experience in investment banking with several companies, including Deutsche Bank and JP Morgan. She is a member of the advisory board for venture capital at the London School of Economics.
Desiree Fixler: Because I have experienced it. It's not necessarily that DWS has wrongly defined what ESG-compliant investments are, but rather it’s about misrepresentation, the difference between what the company says internally and what it says externally. DWS markets its ESG strategy as world-class and above the industry standard, but internally it says it is poor and unclear. It reports externally that a large share of its investments are in ESG-compliant strategies, but states internally that it is only a fraction. The board was aware of the mistakes, the operational risk and the misrepresentation. Many investors want to invest in well-managed, sustainable companies and make a difference. Therefore, it is terrible when executives misuse this issue as a marketing tool.
DER SPIEGEL: You were head of sustainability at DWS for just eight months. How did you arrive at such conclusions after such a brief period?
Fixler: Because of Wirecard.
DER SPIEGEL: How so?
Fixler: Because Wirecard shares were in an ESG fund and still had a "B" rating, the second highest rating in terms of business ethics, until June 2020 – right up until the company collapsed and even though there had been blatant accusations for a long time. Colleagues have confirmed to me that there were many analytical problems and many portfolio managers refused to comply with ESG guidelines.
DER SPIEGEL: Is this a problem specific to DWS?
Fixler: I believe that other asset managers also struggle with ESG. It is not a crime to lag behind a market or to have weaknesses here and there. But the point where DWS crossed the line was when the company marketed itself as a "leader" and "above the industry standard" and when it publicly stated that the majority of its assets under management were ESG integrated. DWS has defined and qualified its ESG framework in a policy statement and in its annual report. They pretend one thing to the outside world, but say something different internally. That doesn't work. If you sell a product, if you sell a fund to investors on a certain basis, then you better make sure that you adhere to your own rules.
DER SPIEGEL: Some have accused you of seeking revenge against your former employer.
Fixler: No, it's about standing up for what's right. And let's be clear: It wasn't me who first approached the press. I have learned it was DWS itself. At the end of March, an internal memo from CEO Wöhrmann about my dismissal was immediately forwarded to the Bloomberg news agency, claiming that I had not pushed the ESG agenda enough.
DER SPIEGEL: Why did you have to leave in the first place?
Fixler: I was fired. And I have to admit that I didn't see it coming. There were no warning signs, no conflicts. In fact, my performance appraisals were very good until the end. It was not a case of "me versus them.” I worked well with the vast majority of my colleagues, including the board members. We agreed on the gaps and shortcomings of the platform and that we needed an action plan for the future. In my last presentation to the board in February, I called for urgent and profound changes, but Wöhrmann apparently disagreed.
DER SPIEGEL: What was your relationship with Wöhrmann like?
DWS CEO Asoka WöhrmannFoto: Hannibal Hanschke / picture alliance/dpa/Reuters Images Europe/Pool
Fixler: Very cordial until the end. While we never had any problems, I also never got clear answers or a clear mandate to fix the problems.
DER SPIEGEL: Why did he bring you to DWS in the first place?
Fixler: I was to drive and monitor the ESG issue throughout the DWS platform. I reported directly to the CEO and was in constant contact with the board.
DER SPIEGEL: What is your own background in ESG?
Fixler: I have more than 20 years of experience in investment banking and impact investing in senior positions in London, New York and Frankfurt. In 2005, I was working in investment banking at JP Morgan Chase when I read the book "Banker to the Poor" by Muhammad Yunus. It turned my world upside down, because I realized I could combine my capital market knowledge with social impact. I wanted to develop investment products that had a double bottom line: financial return combined with social and environmental impact. I loved it.
DER SPIEGEL: Wöhrmann proclaims that DWS has decades of experience with sustainable investments. Is that not true?
Fixler: It is true that the Deutsche Bank Group has had experience with responsible investments for more than 20 years. And there are also talented and committed people at DWS who strive to implement the topic of ESG cleanly. But this often only happens in isolated instances and is not scaled across the platform. Look: The Golf is a great car, but VW was still heavily fined because of Dieselgate. A holistic approach is needed.
DER SPIEGEL: How does DWS ensure that its funds are ESG-compatible?
Fixler: This is where the problem lies. Monitoring and quality control are deficient. For example, DWS admits in their 2020 annual report that they are just now developing a monitoring system to track how they integrate ESG into their investments. On the other hand, they say that 459 billion euros have already been invested in an ESG-compliant way. How can that be? Without a corresponding system, how can the company even check whether and how ESG criteria are applied to its assets under management? At DWS, there is an ESG policy, but many of the fund managers do not comply with it. It is a clear case of "form before substance.” And DWS's response to my accusations was very confusing. A lot of jargon and little substance.
DER SPIEGEL: Were there any concerns expressed internally?
Fixler: Yes, there are numerous emails, slides and board reports on the subject. Senior staff in the product department, the client department, the investment department and risk management knew what was going on.
DER SPIEGEL: Then why did nothing happen?
Fixler: I don't know, that's the shocking thing. Everything was on the right track, the action plan and the efforts to better implement ESG. I never thought of complaining before I was fired, because I always thought we were following through with the action plan. Until the end, I was praised, even in writing, by two board members and other senior staff for making tough but good decisions. My dismissal caught me completely off guard.
DER SPIEGEL: What happened afterwards?
Fixler: I sent a very detailed letter to Karl von Rohr, the head of the DWS supervisory board and deputy CEO of the group, in which I described the problems. The reply then said that no basis for my allegations had been found. I think that the audit report and the extent of the data and evidence examined should be disclosed.
DER SPIEGEL: Deutsche Bank has a murky past from which it would like to free itself, as CEO Christian Sewing has publicly proclaimed. Is he, or was he, involved in this case?
Fixler: I am not sure what he knows or knew. I did attend some meetings of the Group Sustainability Committee involving the division heads and Sewing himself, but that didn't go into much detail in his area.
DER SPIEGEL: There is no clear definition of what actually counts as ESG-compliant. Do companies have too much leeway when it comes to defining the ESG-compliance of their investments?
Fixler: Yes, it is true that the ESG market lacks clear definitions, reporting standards and impact measurement guidelines. That is why greenwashing is so pervasive. Just look at the flood disaster in Germany and the call for more private and government investment to drive climate action. That is why it is terrible when private capital flows into U.S. technology stocks instead of into climate-friendly investments. These may be high performance investments, but they will not put us on a carbon-neutral path.
DER SPIEGEL: Is it the case that the fund industry generally handles it the way DWS does, precisely because there is a lack of binding and uniform definitions?
Fixler: I don't know if there is misrepresentation at other companies as well. What I do know is that asset managers are challenged by the enormous demand for ESG products, the new EU regulatory framework and the lack of standardized ESG reporting guidelines, which lead to incomplete ESG data sets. ESG is complex and still in its infancy, so it is understandable if fund managers lag behind. But it is quite another thing to deliberately provide false information.
DER SPIEGEL: The ESG issue is associated with high hopes for stopping climate change. For years, the financial sector has been launching ESG funds and collecting above-average fees from investors. Your case sheds a very different light on the scene. Is ESG a fake?
Fixler: No. There are many asset managers who are really committed and follow the right path. But investors should be wary when fund managers claim to invest in a particularly ESG-compliant way without providing any evidence.
DER SPIEGEL: What needs to be done?
Fixler: Regulation must become stricter. All too often, an investor invests in a product with a green label only to find that his portfolio is overloaded with stocks from the U.S. tech sector or healthcare. The definition of impact needs to be clearer. Another way to tackle this problem is at the highest level.
DER SPIEGEL: What do you mean?
Fixler: If executives realize that greenwashing or ESG misstatements may be securities fraud and harsh penalties could follow, they will think twice about doing it.
DER SPIEGEL: What can investors actually do if they want to invest sustainably?
Fixler: They have to be very critical and ask for evidence of whether fund managers really invest in an ESG-compliant way. They have to assess the track record and seriousness of the fund managers. I know that's a lot to ask. That's why regulation has to become stricter.
DER SPIEGEL: American and German financial regulators are investigating. What is the worst that could come out of it for Deutsche Bank and DWS?
Fixler: That is a question for the authorities and the lawyers. But let’s look at the consequences of this incident. The sustainability propaganda and rhetoric of DWS, as well as from other financial institutions, got completely out of control. Companies make statements like: "ESG is at the core of everything we do.” And then you only see one woman on the board. For real? Maybe the case is a turning point for the industry to tone down the rhetoric and act. Really act. Maybe something good will come of it.
When approached for comment, DWS said in a statement that while it could not provide a detailed response on specific points "for a variety of legal and regulatory reasons,” they did want to clear things up on two points. First, following the KPMG special report at the end of April 2020, the Wirecard shares that were still part of the ESG fund at DWS were sold. Second, in its 2020 annual report, DWS explicitly identified 75 billion euros as ESG-incompatible and 459 billion euros as ESG-compatible. Those investments declared ESG-compatible included investment strategies whose portfolios are more than 90 percent compliant with ESG fundamentals.