Transcription
August 1st, 2021. Desirée Fixler wakes up at her parents' home in New York City. "It was very early Sunday morning and my phone is kind of, like, pinging and lighting up and it's kind of weird." This morning will turn her entire life upside down.
She knew this day would come eventually. Over the past few months, she has been talking to journalists from The Wall Street Journal. Their conversations focused on her former employer, who she is accusing of serious wrongdoing. She has shared internal documents to back up her claims. Desiree is fully aware that her story is highly explosive. She knows about the massive repercussions it could create. But the question is, will people believe her?
"I was a nervous wreck, an absolute nervous wreck." Desiree picks up her phone. It is lighting up with notifications by the second. "I, you know, just load up the Wall Street Journal app and, you know, there it is. There's my face. It's such a disorienting feeling, just seeing yourself in it because it's a personal story."
The title was something like, "Fired Executive Says Deutsche Bank's DWS Overstated Sustainable Investing Efforts." Desiree Fixler is that fired executive. For eight months, she was the Chief Sustainability Officer at DWS, a subsidiary of Germany's flagship investment bank, Deutsche Bank. Today, DWS is arguably Germany's largest asset manager, with over $900 billion in client assets. And Desiree claims that DWS has been strategically lying about its sustainable investment efforts. Thanks to her, that morning, the entire world learns about the largest greenwashing scandal in global finance.
"I don't think they ever considered that I might have the balls to speak out. Someone needed to stand up and speak the truth. You can't pretend to the outside world that you're nice, shiny, and green, and internally a brown piece of [Music] sh."
Parts of this video draw on statements from Desiree Fixler that we haven't been able to fully verify independently. To date, neither Deutsche Bank nor DWS or its board members have been convicted in this case. However, the prosecutor's office at German financial hub Frankfurt is currently investigating DWS and a former CEO. In the US, investigations were dropped after DWS paid a multi-million dollar fine to the SEC.
We traveled to London for this story. This is where Desiree lives and works now. She is American and has built a pretty classic career in the finance industry. "I've worked at a number of large banks. And in fact, I worked at Deutsche Bank in the mid-1990s, from the mid-90s to the late-90s. You know, I worked at, you know, JP Morgan, and I worked at Zeiss Group, a credit investment management company."
Starting in the mid-2000s, she began focusing her work on sustainable, green investment strategies. "When I got the job offer at DWS, um, in 2020, uh, to be their first, uh, Chief Sustainability Officer, I was, I was at, I mean, I was so happy. It was a dream job. I was so excited for this."
DWS is listed on a Frankfurt Stock Exchange. While it operates as an independent company, it is 80% owned by and closely tied to Deutsche Bank. DWS handles one of the bank's four main business areas. Its role is to manage money for private and institutional investors through funds. It invests that money in assets like stocks. Their headquarters are located in this Frankfurt City complex. This is where Desiree started working in August 2020.
"I was hired, um, to set DWS's sustainability strategy for the entire company, and also to set a sustainability strategy for the assets under management, how DWS would approach sustainable investing." DWS brands itself as a market leader in sustainable investments. Desiree's job is to solidify that reputation and expand the company's ESG strategy.
ESG is short for environmental, social, and governance criteria used to evaluate companies. "And of course, we know what the three letters stand for. The problem is, it means different things to different people." The idea is simple: companies with high ESG ratings are supposed to be well-managed and have a positive impact on society and the environment. But in finance, ESG factors are often interpreted differently. Some people focus more on how secure and resilient a company is against environmental or societal risks. How might climate change impact the business? What effects could political decisions have? How could shifting consumer preferences affect your company?
"It means to ensure that your business is profitable in a changing world, right? So it's very much focused on, you know, money-making." The ESG acronym comes with countless issues. There's no universal definition, the available data is often poor, and there's a glaring lack of regulation. Evaluation criteria are often opaque, and the results can vary wildly. We'll touch on many of these problems in this video, but explaining it all in detail would go far beyond our scope. You'll find further resources on ESG in the description.
Despite all those uncertainties, the ESG industry is growing steadily. Investors around the globe are eager to invest sustainably. "ESG had become a big factor. It was becoming a very big growth market." That's not lost on DWS. The then CEO, Asoka Wöhrmann, repeatedly emphasizes that ESG and sustainability are of utmost importance to the company. In advertisements, DWS continually touts its years of experience in the sector. "For more than 20 years, ESG as a topic influences the product and investment decisions at Deutsche Asset Management. And in '08, we were one of the first asset managers to sign the UN-sponsored Principles for Responsible Investment."
But when Desiree starts her job in Frankfurt, she's in for a surprise. She works closely with board members of DWS and Deutsche Bank, as well as high-ranking fund managers and analysts. But according to Fixler, their focus is rarely on the core business. "In all my interactions with Karl von Rohr or Asoka or the Vorstände at DWS, these folks didn't like talking about the business. So, you know, they didn't use Bloomberg, they weren't looking at financial markets. There was no excitement about what they were doing. I had the feeling they loved their senior positions, they loved the perks, they thought they were very special because they were, you know, Vorstände. You know, and all of my interactions, there was always one word missing in all the meetings: client. I never, ever heard these guys speak about their clients, their customers."
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Over the years, Deutsche Bank has been caught up in one major scandal after another. Just months before Desiree's tenure, Deutsche Bank had paid a hefty penalty for its business ties to convicted sex offender Jeffrey Epstein. During that period, there were even rumors that Deutsche Bank might completely pull out of the US market. Maybe that's why Desiree senses a different vibe in Frankfurt compared to other financial hubs. "It was weird. It's a very strange institution. I mean, I think if you work for the institution in London or New York, it's okay. It's probably feels like any other sort of bank or asset management company. But Frankfurt head office is really strange. I used to call it the upside-down world. When you're in meetings, you know, or just reading your emails, interacting with senior brass at Deutsche Bank, these are some very strange, very peculiar individuals."
Desiree gets to work either way. Her first step takes stock of the situation: what companies is DWS investing in, and how are these decisions made? One company keeps popping up, one that has gained quite the reputation. The Wirecard scandal broke in June 2020, just a few months before Desiree got to Frankfurt. DWS lost around $650 million when the payment provider collapsed. Oddly enough, Wirecard was listed in DWS's ESG Investa fund. That fund was supposedly reserved for companies that are responsibly managed and adhere to social and environmental standards. Up until April 2020, Wirecard was the fund's second largest holding, making up 9.1% of its portfolio. That position was reduced to 4.2% just two months before the scandal broke.
Desiree is puzzled. How did Wirecard get into this ESG fund? She decides to investigate how the company made its way into this supposedly sustainable fund and why DWS held on to it for so long. She contacts the responsible team but keeps getting the same response. "We have already sold all Wirecard." "Like, I know, and the company has collapsed and we're looking at taking a 650 million euro hit on this. I know. The question is, how did it happen?"
Determined to find answers, Desiree tracks down the internal ESG report on Wirecard. "When I clicked on it and I opened up the report, I swear I almost fell off my chair. I couldn't believe that Wirecard ended up in this portfolio and in other portfolios." Desiree shared that internal DWS document with us. It shows Wirecard's ESG rating across various categories in May 2020. That's just one month before the company's total collapse. At that time, Wirecard held the second highest rating in the "Norm Controversies" category, a global standard for assessing responsible business practices. On a scale from A to F, Wirecard got a B from DWS.
"And what was cited in support to Wirecard's high ESG status was because it has good business ethics. It cited strong corporate governance and good business ethics. That's what you see, those two words: business ethics. Check." At that point, the Financial Times had already published multiple articles exposing Wirecard's shady accounting practices. KPMG had been hired to conduct an independent audit, and KPMG had already released its report. It revealed, among other things, that Wirecard had failed to provide evidence for over $1 billion of cash balances. That was in April 2020. How then did Wirecard still manage to score a B a full month later, despite these glaring red flags, an ESG score that is supposed to be based on good business ethics? Desiree claims that Wirecard even held that ESG score all the way into June. Unfortunately, we couldn't verify this ourselves. DWS declined to answer our questions about Wirecard, stating they don't comment on ongoing proceedings.
At the time, DWS uses a proprietary and supposedly highly sophisticated system to analyze company's ESG factors: the so-called ESG engine. "In 2008, we signed the Principle for Responsible Investment, the PRI. Since then, we made significant, exciting developments to our product suites and processes. Most notably, we have developed a highly sophisticated ESG analyzed tool, the ESG Engine. With the ESG Engine, it is possible to integrate the ESG criteria into our clients' and our own investment processes and portfolios. More than 3,000 companies can be screened for our portfolio managers and finally for our clients."
The ESG engine is fed company data from major rating agencies and financial service providers like MSCI, ISS, and Sustainalytics. But a lot of times, the raw data from many rating agencies is already flawed. The exact criteria and weighting are not standardized. The evaluation processes are quite opaque and not made public. Either way, this data is then processed and analyzed by the ESG engine. "So externally, the ESG engine was marketed as world-class, as sophisticated. Internally, the most commonly used word to describe the ESG engine was the word 'shitty.' Everyone knew there was a problem with this engine." The technology behind the engine was said to be extremely unreliable. The ratings, it turned out, often didn't make any sense. "So internally, it was well known this was a shitty system. Portfolio managers, anyone working in ESG, and especially the Vorstände. Vorstände means board."
Desiree shared internal emails with us. These emails revealed that parts of DWS were fully aware of the poor state of the ESG systems. "We do risk management and we do it badly." That's former DWS Global Head of Research, Francesco Curto, writing to Chief Investment Officer, Stefan Kreuzkamp.
In addition to the problematic ESG engine, DWS introduces another tool in 2020. "And they had this world-class, sophisticated, smart integration framework, um, sophisticated, using artificial intelligence above industry standards. And what the system did is it issued ESG research reports on each of their invested companies." This smart integration system draws on the data from the proprietary ESG engine and ends up awarding Wirecard its highly questionable B rating. Meanwhile, according to Fixler, Amazon receives the lowest possible rating, F. Desiree says the system seemed to prioritize the number of controversies over their severity. "Their smart integration system is telling investors, 'Go long, invest in Wirecard. It's a great company, it's really well-run, it only has one controversy.' 'Stay away or even sell Amazon because this is a company that's about to collapse because it has so many social and governance issues.'"
Desiree shares a serious suspicion with us. She believes the DWS systems were manipulated to favor companies the firm was already invested in by giving them more lenient ESG ratings. "I believe that smart integration was set up so that the system would be more gentle on their high-risk exposures like Wirecard and like coal companies, as an example." We cannot independently verify this claim, and Desiree was unable to provide substantial evidence to support it. Unfortunately, DWS also declined to comment on the issue, citing ongoing investigations.
Desiree grows more and more frustrated. DWS brands itself as a leader in ESG investing. Desiree claims that internally, the company actually had a binding ESG policy. Portfolio managers were required to integrate ESG risk and opportunity factors into their investment decisions. But according to her, most of them simply ignored this policy. "It was well known at the company that many of our most senior portfolio managers just disregarded ESG."
Desiree decides to take the matter to the board. "We can, we have two ways we can go here. Just get rid of the policy, right, and stop lying to the public that we're this great ESG platform. Or we enforce the policy and make the portfolio managers do what you're telling investors they're doing. It's one or the other, but you can't have it both ways. You can't pretend to the outside world that you're nice, shiny, and green, and internally a brown piece of sh."
From late 2020 to early 2021, she prepares several presentations for the DWS board. She also claims her concerns are repeatedly ignored. Nobody seems to care about or share them. By early 2021, preparations for the previous year's annual report are underway. "Asoka Wöhrmann and the Vorstände wanted to tell the world that their ESG assets under management went up €459 billion, or roughly $550 billion." That's the total worth of assets managed using the so-called ESG integration approach. According to the report, the figure suggests that ESG criteria were considered for $550 billion of investments, more than half of DWS's total managed assets for 2020, which stood at $950 billion. That would be a solid 2% growth compared to the previous year.
As part of her role as Chief Sustainability Officer, Desiree's job is to confirm that number. "And I sat there and looked up to say, like, 'Where are you guys getting the numbers? We don't have a tracking system. There's no, we're not, we're not tracking this. At best, we can maybe track, I don't know, manually, we can maybe look at 150 billion of assets under management are aligned with ESG. But 459 billion? No way. And we know that the majority of our portfolio managers are disregarding ESG. They've said that live.' So it, it, you know, it was a completely false number."
Desiree refuses to sign off on the ESG figure for the annual report. Instead, she uses a board meeting to push for urgent changes. "My recommendation is that we need fast, urgent change. We need to make the changes now. And this was February 16th, 2021. You know, I felt very strongly, 'We're lying to the public. We need to make these changes.' And so in this Vorstandsitzung, I, I was on the aggressive side. I just told my board, my Vorstände, 'I need an answer now. Like, we can't sit on this anymore. This is urgent. Here are my recommendations, right? Here's the timeline, right?' So we had an action plan to change. And during this board meeting, I didn't get an answer. They refused to answer anything." We have reviewed the internal presentation she gave to the board. In it, Desiree lays out the urgent need for fundamental changes and improvements. She tells the board that there's no clear ESG mission or strategy, that internal policies and tools are vague and insufficient.
A few days later, Desiree is summoned to her boss's office, Asoka Wöhrmann. "So I come in with the, with the material. Uh, I sit down. And what was strange is that he has two parts to his office. A front part has windows, and then there's a back chamber. And that's used for Zoom calls and there are no windows. So it was, we always sat in the front part. So it's kind of weird that we were meeting in the back part. But whatever, you know, he was making small chat at the beginning. And then we sit down. I show him the, you know, the, the document. And he pushes it away and he says, 'You know, no good news.' And then he just starts going off, 'Everybody hates you. Nobody likes you. You communicate bad, bad communicate.'" Not a single word regarding her concerns about the annual report. "No, there was, there was absolutely no substance to this meeting. It was just him ranting." We reached out to Asoka Wöhrmann to get his side of the story, but he didn't respond. DWS has stated it will not comment on current or former employees.
March 12th, 2021. Desiree is in New York. About a month has passed since her board presentation. The meeting with Wöhrmann was just a couple of weeks ago. "I wake up in the morning and I think a lot of us do this, like, you reach first over for your, your iPhone, your phone. And I can see that I can access the platform. And so, you know, I bolt up, like, 'What's going on here?' And I realized that I can't access the DWS platform at all. I then receive on my Gmail this message from Mr. Anus, Asoka's employment lawyer, that I've been fired. And the letter is in my mailbox in Frankfurt. I don't know what's going on. Um, I just hear from this Mr. Anus that I'm fired. There's no message from HR or from Asoka. I knew that this is March 12th, this is the day that the annual report comes out. So I quickly go to DWS site, and you can access this, this is open to the public, to pull the annual report that's just been published. And I go through there looking for the keywords and just realize, 'Holy, that's when the penny dropped. Holy, I just got fired because I raised all these concerns of greenwashing.'"
It's official. DWS states that $550 billion of its assets are ESG integrated. Desiree Fixler has been fired. Her German residence permit is tied to her job at DWS. Losing her position means losing her residence in Germany. She moves back in with her parents in New York for about a year. DWS attributes her termination to slow progress. To this day, Desiree Fixler is convinced she was fired because she raised concerns about misleading ESG claims and pushed for reforms. She took her case to labor court in Frankfurt but lost, partly because she was still in her probationary period. Desiree says DWS gave yet another explanation to justify her termination in court. "But in court, they said I was, um, culturally a bad fit because I'm American and that I didn't know their good German ways."
On August 1st, 2021, The Wall Street Journal article goes public, four months after DWS fired Desiree and published the annual report. She becomes a whistleblower, and a massive greenwashing scandal unfolds. "DWS sell-off excessive as greenwashing in doubt." "Propaganda." "DWS whistleblower says greenwashing is widespread."
DWS rejects Desiree's allegations entirely. The company says it is fully committed to transparency, claiming it's constantly telling its clients and stakeholders that the path to a sustainable future is long and challenging. Just days after the article is published, Desiree gets a phone call. "I was driving in my car in New York and my phone rang. And I can see the area code 202. 202 is Washington, DC. And I quickly just put my blinker on and just pulled over on the side. And I just had a feeling, 'I think these are the feds.' So I take the call. And sure enough, the SEC, the BaFin of the US, the Department of Justice, and the FBI called me up. They informed me that they themselves had opened a case already to investigate ESG at DWS."
The US authorities want to question Desiree as a witness. She agrees. "I mean, that was the game changer. It's one thing to make a big splash in the news. It's another thing when you're told law enforcement is now looking into fraud, ESG fraud. That's also when I knew I'd be kind of safe because Deutsche Bank isn't going to mess around with me now. The US government is watching them."
Shortly after the US authorities begin their investigation, Germany's Federal Financial Supervisory Authority follow suit. Although, according to Fixler, they don't seem to be too keen about the case. "I think the US authorities took this very seriously. After it became public, the SEC and the Department of Justice were investigating, uh, DWS. The BaFin reluctantly, and I really stress reluctantly, opened up an investigation. I have to say that I didn't think that the BaFin operated professionally. Um, I felt, um, they wanted to do their best to ignore it. Um, they wanted to disregard it. I didn't think that they took, um, greenwashing seriously." We reached out to the authority to ask if they could explain how anyone could get that impression and whether they were in fact reluctant to open an investigation. They refused to answer our questions.
The first raids take place in May 2022. German officials raid the DWS headquarters in Frankfurt. They also pay a visit to the parent company, Deutsche Bank. A few weeks later, in June 2022, Desiree's former boss, Asoka Wöhrmann, steps down as DWS's CEO. He says that the greenwashing allegations have taken a toll on him, along with personal attacks and threats. He agreed to his resignation with a heavy heart, hoping it would give both DWS and himself a fresh start. In 2023, German media report that Wöhrmann is under investigation himself. The Frankfurt Public Prosecutor's Office has confirmed to us that they are investigating a former DWS CEO over the greenwashing allegations. But Wöhrmann is not the only one to face the music. "So the CEO got booted out, the CIO, the COO, CFO, Global Head of Research, Global Head of HR, Global Head of Communications. It just eviscerated senior management there."
Also in 2023, the SEC reaches a historic settlement with DWS subsidiary in the US. The company receives a $19 million fine over the greenwashing allegations. Never before has the SEC ever imposed such a hefty penalty for ESG greenwashing. According to the SEC, DWS made concerning misstatements. It marketed itself as a leader in ESG but failed to adequately implement its own policies while having led clients and investors to believe it would. And it failed to ensure that its public statements about the ESG integrated products were accurate. By settling with the SEC, DWS neither has to admit to nor deny the violations, effectively avoiding a courtroom showdown.
"DWS just pretends it was a, it was a little technical matter. It was an internal processing matter. 'We stand by our disclosures.' That is a lie. The, the SEC, um, document, the SEC enforcement action is crystal clear." In a written response to us, DWS states it had already publicly acknowledged overly enthusiastic marketing and the inadequate implementation of control processes prior to the SEC decision. DWS also emphasizes the SEC found no evidence of fraudulent intent. The company further claims it has taken steps to address the identified shortcomings. The company unveiled a revised sustainability strategy and restructured its sustainability division.
In the 2021 half-year report, two things have disappeared: the figure of $550 billion and the term "ESG integration approach." Instead, DWS now reports $84 billion as assets managed under ESG criteria. By the time the 2021 annual report is published, that number has risen to $138 billion. That's a far cry from the $550 billion reported the previous year. DWS says the figures cannot be compared directly because the framework used to determine the value has been further refined.
Did DWS learn something from this case? "No, I don't believe, I don't believe that there's been any cultural shift at that institution because still today, even after the US enforcement actions and a widening criminal investigation, DWS still makes the statement, 'We stand by all our disclosures.' I think genuinely, they're, they absolutely double down in denial and in cover-up. And so no, they have not come out to apologize to shareholders, to investors, which by the way, other institutions that, that got in trouble for greenwashing, they did just that."
"Truthfully, you know, after working in this industry since 2005, and after, you know, working at DWS and witnessing all the greenwashing, I've concluded that ESG, at the end of the day, was a multi-trillion marketing scheme. It used a climate crisis, it used fear-mongering to power the marketing to entice people to invest in products that were mismarketed. They were mismarked to say that they were offering positive environmental and social impact. But at the end of the day, this grand multi-trillion dollars that's been mobilized into ESG offered no environmental or social impact."
The global financial industry plays an important role in the fight against climate change. There's continuous demand for sustainable investment opportunities, and the industry is now worth over $30 trillion, which makes it all the more disappointing that labels like "sustainability" and "ESG" can't always be trusted, neither at DWS nor at many other financial institutions. If you're considering investments in that area, be sure to always read the fine print.
German authorities have been investigating DWS for almost three years now. Desiree Fixler and other experts believe DWS will eventually have to face consequences. It does seem like the DWS scandal may have been a wake-up call for the financial industry. Investment advisers and asset managers are treading more carefully when it comes to bold promises. And even DWS seems to have learned a lesson, judging by the more modest numbers in its latest annual reports. But this case highlights once again the urgent need for governments and regulators to step up and crack down hard. Investments must deliver on their promises. The SEC has pledged to take a tougher stance on greenwashing in the future. Let's hope that authorities in other countries follow soon.