Action adds to probes by SEC and federal prosecutors in the U.S. into asset manager’s claims of sustainable investing

The Frankfurt offices of Deutsche Bank AG and its asset-management subsidiary DWS Group were raided by authorities on Tuesday over allegations of greenwashing in its mutual funds, adding to pressure on the lender which is already facing a U.S. probe.

Around 50 agents of the city’s public prosecutor’s office, alongside German market regulator BaFin and the federal criminal police office had been deployed Tuesday morning, a spokeswoman for Frankfurt prosecutor’s office said.

The initial suspicion is of investment fraud, the spokeswoman said.

The action Tuesday adds to probes by the Securities and Exchange Commission and federal prosecutors in the U.S. into the asset manager’s claims of sustainable investing. The Wall Street Journal reported last year that DWS was being investigated for disclosures around funds that say they use environmental, social or governance, or ESG factors to choose investments. The investigation started after the firm’s former head of sustainability said claims about the funds were overstated.

Regulators have been stepping up scrutiny of such funds as investors pour cash into the category. Last week, the SEC fined Bank of New York Mellon Corp. $1.5 million for misleading claims about ESG funds. Within the industry, standards and measurements of ESG benefits are still evolving, making it difficult for investors to know how their funds are investing.

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Deutsche Bank confirmed the searches. “The measures of the public prosecutors are directed against unknown people in connection with greenwashing allegations against DWS,” a spokesman for the German lender said.

Deutsche shares were down 1.7% on the news.

A DWS spokesperson said: “We have continuously cooperated fully with all relevant regulators and authorities on this matter and will continue to do so.”

Deutsche Bank was last searched by German authorities in late April, which the lender said was related to activity reports it filed to an anti-money-laundering agency.

Source: Wall Street Journal