Industry Updates

DWS CEO Hoops: We are a public ‘guinea pig’ for ESG

Stefan Hoops did not rule out the prospect of a large fine following its ESG probe

Theo Andrew

Stefan Hoops

DWS CEO Stefan Hoops has said the asset manager has been made a “public guinea pig” as investigations into the firm’s ESG practices continue.

The German asset manager has been subject to a probe by German and US regulators since its former group sustainability officer Desiree Fixler raised concerns about how its ESG asset was being reported in its 2020 annual report.

Police then raided its offices in June last year resulting in its former CEO Asoka Woehrmann stepping down.

In comments to analysts about the firm’s 2022 results last week, Hoops said the asset manager has become the “guinea pig in the public eye for how other managers should set up their ESG”.

It comes after the DWS chief said it would take the “unusual step” of publishing its internal investigation on its ESG practices on its own website last June.

“We will share the internal review on the website to give comfort to investors, but also to other asset managers,” Hoops said.

He did also not rule out the possibility of receiving a large fine following the external investigation.

“We are having active discussions with authorities and are hopeful we are moving to a resolution. The board and I are focused on resolving the matter as quickly as possible,” Hoops added.

“There are no precedents in Germany, we cannot exclude that the outcome may be adverse and could involve financial penalties.”

Responding to Hoops comments, Fixler said: “It would be more helpful and genuine if DWS were to publish findings from an external independent investigator, not advocating or defending on their behalf.”

DWS, which is majority owned by Deutsche Bank, said it has been fully cooperating with the regulators and has to date shared over three million documents.

The firm said it has made some progress in its sustainability practices following the internal review, including revamping its sustainability council.

Hoops’ comments come as clients pulled €19.9bn from the asset manager in 2022, with its passive arm Xtrackers accounting for €7.1bn of the outflows, as “clients de-risked their portfolios given the adverse environment and prevailing expectations of a recession”.

Despite this, the group remains bullish in its ambition to overtake Amundi as Europe’s second-largest ETF issuer by 2025, targeting annual asset growth of 12% for the next three years.

Hoops said two-thirds of the growth will come from flows while the remaining third is expected to come from rising markets.

We are slightly ahead of track on flows, and better than expected on markets. We have a clear gameplan,” he said.

“We are building a pipeline of targeted and bespoke ETFs to sustain the positive flow momentum we have seen at the start of 2023.”

Furthermore, it said the firm will have to “spend more time” on its distribution channels as it is “too reliant on private banks and large institutional clients”.

Hoops added it would be strengthening its fixed income offering, an area that its rivals have earmarked for strong growth this year.

We have some gaps in our fixed income offering, as you have seen with our very large competitors, they have strong inflows in fixed income on the passive side,” he said.

In January, DWS unveiled a seven-strong thematic ESG range tracking the United Nations Sustainable Development Goals, ETF Stream revealed.

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