Frankfurt New legal trouble for DWS: The consumer advice center in Baden-Württemberg has filed a lawsuit against the fund subsidiary of Deutsche Bank with the Frankfurt Regional Court. With the lawsuit (reference number: 3-10 O 83/22), which is dated September 26, the consumer advocates say they want to take action “against misleading advertising for allegedly sustainable investments”.
A hearing was therefore scheduled for March 10, 2023. DWS rejects the criticism of the consumer center.
According to the consumer advocates, the aim of the lawsuit is “to have certain, but quite typical, hardly comprehensible advertising slogans for sales promotion banned by the court on the grounds of misleading”. Niels Nauhauser, Head of Department for Financial Issues at the Consumer Advice Center Baden-Württemberg, sees an exaggerated positive effect of products on the environment, the so-called greenwashing, on the agenda for financial products.
In his opinion, however, the influence of financial products advertised as sustainable on the promotion of sustainable technologies and sustainable business still needs to be proven. “Full-bodied advertising promises based on a very idiosyncratic understanding of the capital markets do not lead to more sustainability.”
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As long as there is neither a legal definition of what “sustainable investments” should be, nor valid data for measuring sustainability are available, effective supervision cannot prevent greenwashing either.
Consumer advocates have complained several times about alleged greenwashing
For the Baden-Württemberg consumer advice center, it is another lawsuit against a financial provider over greenwashing allegations. The consumer advocates had already sued DWS competitor Deka, which announced during the trial that it would refrain from the sustainability advertising it had criticized.
There was a judgment against Commerzreal Fund Management, and consumer advocates are also suing DKB. The consumer advice center has therefore reached an out-of-court agreement with Liqid, Stuttgarter Versicherung and Tomorrow.
Consumer advocates consider advertising for a sustainability equity fund to be “misleading”
Specifically, the DWS consumer advice center claims that investors who invest money in the “DWS Invest ESG Climate Tech Fund” equity fund from May 31, 2022 invest zero percent of their fund assets in companies from certain controversial sectors such as “coal” or “coal”. Invest “armament goods”. Consumer advocates consider this to be “misleading”.
Because it is not explained transparently how DWS gets this information. Also, due to threshold values, it cannot be ruled out that the companies held by the fund do generate part of their sales in the controversial sector. Investors are led to believe that they invest zero percent in coal, while the companies held in the fund are likely to generate around 15 percent of their sales in the coal industry, Nauhauser complains.
In addition, the consumer advocates complain that in the advertising mentioned, DWS uses various environmental and sustainability-related criteria to present advantages of its fund compared to an investment based on a reference value – for example, that the companies in the fund portfolio allegedly emit 90 percent less carbon dioxide (CO2) than the companies in the fund reference value. The consumer advice center considers this advertising to be misleading, partly because DWS does not explain in a comprehensible manner how it calculates the CO2 emission effect, neither for the fund nor for the reference value.
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According to consumer advocates, this is also hardly possible because the underlying reference index, the global stock index MSCI AC World, contains around 2900 companies for which a wide variety of obligations to disclose their sustainability orientation apply, including “non-auditable” self-disclosures.
Furthermore, DWS claims without justification that investors with the fund mentioned are investing “specifically in achieving the climate goals” and are “helping to counteract climate change through targeted investments” or mitigate its effects.
The consumer advice center considers this to be unacceptably opaque, especially since the taxonomy regulation of the European Union requires transparent information for such environmentally-related advertising. With its taxonomy, the international community defines certain economic activities as sustainable with regard to the climate goals.
The Deutsche Bank fund subsidiary rejects the allegations
DWS rejects the criticism and emphasizes that it takes great care in creating advertising materials. “We have carefully examined the documents in focus and remain convinced that the DWS advertising messages criticized by the consumer advice center meet the legal requirements,” said the fund provider.
It is our own claim to present products in a transparent and understandable way. In addition, the fund provider emphasizes that it will continue to regularly review and develop its advertising materials.
For DWS, the lawsuit comes at a time when the company, under its new boss Stefan Hoops, is trying to put the unrest about greenwashing behind it. Hoops succeeded Asoka Wöhrmann in early June, who had been embroiled in greenwashing allegations by former DWS sustainability chief Desiree Fixler. Fixler had accused her ex-employer of exaggerating when presenting her own commitment to sustainability.
She had appealed against her dismissal at the Frankfurt Labor Court and lost. The US Securities and Exchange Commission (SEC), the US Department of Justice and German authorities are now examining whether DWS has presented itself as “greener” than it is.
In an internal statement, DWS has announced that it intends to broaden its responsibility for sustainability at management level. This includes a new review body under CFO Claire Peel. The notification is available to the Handelsblatt.
More: What Greenpeace accuses DWS of, among others