Deutsche Bank, which owns an 80 per cent stake of DWS, has agreed to pay a $25 million fine after the company was found to have made misstatements surrounding Environmental and Social Governance (ESG) measures and anti-money laundering (AML) violations.

DWS is a German asset management company which operated as part of Deutsche Bank until 2018 when it became a separate entity through an initial public offering on the Frankfurt Stock Exchange.

The Securities and Exchange Commission (SEC) said the two separate enforcement actions were enacted due to the failure by DWS Group to develop a mutual fund Anti-Money Laundering (AML) programme and over misleading statements it made regarding its ESG investment process.

“The SEC’s order finds that DWS advised mutual funds with billions of dollars in assets yet failed to ensure that the funds had an AML programme tailored to their specific risks, as required by law,” said Gurbir S. Grewal, director of the SEC’s division of enforcement.

The ESG fine relates to the SEC’s findings that the asset manager made “materially misleading statements” about its controls for incorporating ESG factors into research and investment recommendations for ESG integrated products

The enforcement agency found that DWS marketed itself as a leader in ESG that adhered to specific policies for integrating ESG considerations into its investments; however, from August 2018 until late 2021, DWS “failed to adequately implement certain provisions of its global ESG integration policy as it had led clients and investors to believe it would.”

“Whether advertising how they incorporate ESG factors into investment recommendations or making any other representation that is material to investors, investment advisers must ensure that their actions conform to their words,” said Sanjay Wadhwa, deputy director of the SEC’s division of enforcement and head of its climate and ESG taskforce.

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