On Tuesday, the German police raided asset manager DWS, 80 percent owned by Deutsche Bank. The reason: an investigation into ‘greenwashing’. DWS, with 900 billion euros under management, had stated that in 2020 459 billion of that had been invested according to ESG criteria: environmental† social and governance – good governance. But after a former executive claimed this was grossly exaggerated, DWS reported that by 2021 only 115 billion had been invested according to ESG targets.
The US regulator SEC investigated, followed by the German BaFin. And now came the raid. Driver Asoka Wöhrmann will retire. It is somewhat reminiscent of the diesel scandal, where German car manufacturers (and afterwards many abroad) were caught exaggerating the environmental friendliness of their car engines. But there may be more going on here.
Last week, Stuart Kirk, ESG asset manager at British bank HSBC, delivered a remarkable speech at the World Economic Forum in Davos. He was, he said in a lecture, tired of letting yet another ‘idiot’ tell him that the end is near.
Kirk argued that an enormous amount of money and energy goes into ESG policy and research, while there are other, more acute problems. “And who cares that Miami will be six meters under water in 100 years? Amsterdam has been six meters below sea level for centuries, and it is a nice place. We will find a solution for it.”
HSBC tumbled over itself to repair the damage, with heartfelt testimony that climate change is at the heart of the bank. And Kirk herself? He had been so direct that here and there the impression was created that he may have deliberately aimed for the suspension that was imposed on him after his speech.
Now you can say: see, greenwashing is a much deeper and broader problem with investment funds. That is also plausible. Many professional investors and bankers have been going a bit longer than the ESG goals and it would just happen that they have all suddenly come to believe in it. In addition, banks and mutual funds are just as likely to get into crypto products ‘because their customers ask for it’, and a lot of crypto is pretty much the energy-guzzling antithesis of all things ESG.
ESG investing has grown to such an extent that it was also a matter of waiting for accidents. The Financial Times points to figures from investor researcher Morningstar, which indicate that in 2019 EUR 950 billion was invested worldwide according to ESG targets. That is now more than 2,600 billion.
Nevertheless, the ESG investors, in other words the citizen, should also take a look at themselves. You can also simply donate your money to causes that matter. So why invest – an activity that not so long ago was in the same political trap as ‘polluting’?
What has changed? Long shot, but still: the pandemic, a war, impending (geo-)political instability and an out of control climate do not promise much good for this century at the moment.
Wouldn’t it be understandable if people intuitively build up the largest possible wealth buffer? So that they, their children and what comes after, become as immune as possible to the impending doom?
That would shed a different light on the popularity of ESG investing, and would also be quite ambiguous: wanting to get returns from saving planet and society, in case the latter fails.
Maarten Schinkel writes about economics and financial markets.
A version of this article also appeared in the newspaper of June 2, 2022