August 1st 2021 Desir Reay fixler wakes up at her parents' home in New York City it was very early Sunday morning and my phone is kind of B 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 rck there a 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 and it because it's a personal story the title was something like fired executive s Deutsche Banks DWS overstated sustainable investing efforts desire fixler is that
fired executive for 8 months she was the chief sustainability officer at DWS a subsidiary of Germany's Flagship Investment Bank deutche bank today DWS is arguably Germany's largest asset manager with over $900 billion in client assets and Desir 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 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 dche 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 Desi Reay 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 mid90s to the late 90s you know I worked at you know JP Morgan and I worked at Zeiss group uh 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 dge 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 Dai Ray started working in August 2020 I was hired um to set
dwss 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 desire'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 it was becoming a very big growth Market that's not lost on DWS the then CEO aoka verman 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 influences ESG as a topic 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 Desir Reay starts her job in Frankfurt she's in for a surprise she works closely with board members of DWS and Deutch Bank as well as high-ranking fund managers and analysts but according to fixl their focus is rarely on the core business in all my interactions
with Carl fenro or isoka or the forant 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 forant M 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 that may sound exaggerated
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bank had paid a hefty penalty for its business ties to convicted sex offender Jeffrey Epstein during that period there were even rumors that Deutch Bank might completely pull out of the US market maybe that's why Desi Ray 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 wire card scandal broke in June 2020 just a few months before Desi Reay got to Frankfurt DWS lost around $650 million when the payment provider collapsed oddly enough wireart was
listed in dwss 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 wireart was the fund's second largest holding making up 99.1% of its portfolio that position was reduced to 42% just 2 months before the Scandal broke Desir ree is puzzled how did wire card 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 wire card 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 tricks down the internal ESG report on wire card when I clicked on it and I opened up the report I swear I almost fell off my chair I couldn't believe that wire card ended up in this portfolio and in other portfolios Desir shared that internal DWS document with us it shows wire card's ES
G 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 wire card got a B from DWS and what was cited in support to wire card'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 wire card had failed to provide evidence for over $1 billion of cash balances that was in April 2020 how then did wire card still managed to score a b a full month later despite these glaring red Flex an ESG score that is supposed to be based on good business ethics desiri 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 wire card 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 suits and processes most notably we have developed a highly sophisticated ESG analyzed tool the ESG Engine with the ES G 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 waiting are not standardized the evaluation processes are quite opaque and not made public either way this data has done 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 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 forun forun means bored Desir Reay 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 Franchesco CTO writing to Chief investment officer Stefan Kum in addition to the problematic ESG engine DWS introduces another tool in 2020 and they had this worldclass 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 wire card its Highly Questionable B rating meanwhile according to fixler Amazon receives the lowest possible rating f desire says the system seemed to prioritize
the number of controversies over their severity their smart integration system is telling investors go long invest in wire card 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 deser 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 wire card and like coal companies as an example we cannot independently verify this claim and Desir ree was unable to provide substantial evidence to support it unfortunately DWS also declined to comment on the issue citing ongoing investigations Desir grows more and more frustrated ews 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 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 AOK of Warman and the forant 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 is 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 Desi Ray'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 450 9 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 a completely false number desiray 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 forant zits I I was on the aggressive side I just told my board my forant 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 meeting I didn't get an answer they refused to to answer anything we have reviewed the internal presentation she gave to the board in it Desir Reay 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 Desir Reay is summoned to her boss's office a okar verman so I come in with the with the m 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 aoka verman to get his side of the story but
he didn't respond DWS has stated it will not comment on current off former employees March 12th 2021 Desi Ray is in New York about a month has passed since her board presentation the meeting with verman 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 aa'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 aoka I knew that this is March 12th this is the day that the ual report comes out so I quickly go to DWS site and you can access this is open to the public to pull the annual report that's just been published and
I go through there looking for the key words 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 desire 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 Desi Ray 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 4 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 desir'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 Desi Reay 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 bin 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 Desir 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 baa fin reluctantly and I really stressed reluctantly opened up an investigation I have to say that I
didn't think that the ba fin 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 Deutch Bank a few
weeks later in June 2022 desir's former boss aoka verman steps down as dwss 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 Worman 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 Worman 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 secc 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 DWS made material misstatements 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 halfe 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 state 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 mism marketed they were mismarked to say that they were off ing 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 3 years now Desi Ray fixler and other
experts believe DWS will eventually have to face consequences it does seem like the DWS Scandal may have been a wakeup 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 cck 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
