DWS whistleblower says greenwashing is widespread

In new statements on the extent of greenwashing in the fund management industry, Desiree Fixler highlights some uncomfortable truths about sustainable investing.
DWS whistleblower says greenwashing is widespread

Following her revelations that DWS was seriously overstating the extent of its green investment activity, sustainability expert Desiree Fixler has resurfaced with fresh accusations that the German fund house is not the only firm misrepresenting on the issue.

DWS made a big splash of hiring Fixler, an experienced impact and environmental, social and governance (ESG) investment professional, as a ‘change agent’ and head of sustainability in 2020. The firm fired her after she objected to inconsistencies between the company's public statements on ESG and what it was doing in reality.

A backlash against what regulators and market watchdogs see as dubious sustainable reporting is now developing. The announcement by the UK’s Financial Reporting Council that it was excluding several big name global managers from its latest stewardship code, an influential ranking of investor activism and engagement, is the latest sign of this.

The level of investment in ESG funds underscores the importance of the issue for investors: flows hit an all-time high in 2020, with $347 billion committed and 700 new funds launched globally. Sustainability has also become the number one item on the agenda at many company AGMs.

Desiree Fixler

Speaking on Thursday (September 9) on a conference call arranged by the ESG leadership forum TBLI, Fixler said any investor’s approach to ESG has be based on authenticity.

“It’s OK to lag and to make mistakes in adapting to this market. Where it’s dangerous and extremely harmful is when you cross that line into misrepresentation. When you are aware that you might lag in certain areas and yet externally you promote it as super world class.”

She said it was “no longer an issue of struggling with a lack of clarity in the market, when you launch products that talk about saving the environment and rooting for social justice.”

“A lot of senior executives feel that’s what investors want to hear,” she said. “Somehow they forget it is a statement. Just because it’s a warm and cuddly topic, doesn’t mean you don’t have to adhere to securities law. If you yourself have defined it, you’d better make sure that you’re doing it.”

Fixler explained what she had discovered while at DWS, saying that faulty internal ratings had compromised its portfolio management operation, with two separate gap analysis groups concluding the system was broken, yet nothing was done; and that there was no way for the company to validate the numbers it was putting out on its portfolio integration with the Sustainable Development Goals “because there was no tracking system”.

She claimed firms other than DWS are also clouding the issue about their commitment to green investing.

“A lot of the DWS portfolio managers were not complying with the ESG integration, but believe me, other PMs on other platforms say the same thing. They don’t want to shrink their investable universe or move too far away from their benchmark. Others said: ‘Quite frankly, I don’t believe in ESG’.”

Fixler said they misunderstand that she and others are alerting them to new financial risks and opportunities. “And if they want, after conducting that review and potentially discounting the value of an investment, they can still invest in a dirty company.”

While greenwashing features heavily in her story, Fixler said what happened to her was about something else: “Truthfully, my story is about a failure of corporate governance.

“What I struggle with is that it wasn’t necessary to use that rhetoric and to report on these SDG integration numbers.” So she called it out: “The next thing you know, I’m fired."


All fund managers will be under greater scrutiny because of these accusations, say industry observers.

Fiona Donnelly, Hong Kong-based director of the Red Links Sustainability Consortium told AsianInvestor the investment industry still has a long way to go.

“We’re not there yet on effective climate reporting. No entity is, and we are all learning on an ongoing basis about responsible business practice and priorities, so I think it’s totally appropriate to reflect on anything to do with sustainability with a healthy degree of scepticism."

She agreed that companies are also guilty of ‘window dressing', adding that "it’s wrong, and for some too convenient, to write off the concept of sustainability.”

A number of global initiatives seek to address greenwashing, such as the proposed EU Green Bond Standard, which would link green project eligibility with the EU sustainable finance taxonomy. It will also be available to issuers from outside the EU.

Matthew Kuchtyak, vice president of ESG Outreach and Research at Moody’s, told AsianInvestor greenwashing has become a primary area of focus for regulators.

An S&P Global Ratings report found that greenwashing risk was the biggest concern for investors, and a lack of regulatory and data standards has created uncertainty among investors.

Speaking at the GRASFI (Global Research Alliance for Sustainable Finance and Investment) conference on biodiversity in Beijing last week, Steven Billiet, Hong Kong-based CEO for Asia Pacific at BNP Paribas Asset Management, agreed with Fixler that fund managers varying in their adoption of ESG principles is a reflection of the poor quality of ESG data and analytics: “This represents the biggest obstacle to sustainable investing”.

Fixler suggests that this should be an inflexion point “for asset owners, asset managers and consumers in general.

“Let’s all hit the pause button here. We know that we are not reducing emissions with all these activities. We are not on the right pathway.”

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