The German asset management company DWS has been fined 25 million euros ($28.5 million) after prosecutors discovered that it had engaged in greenwashing, a marketing tactic used by companies to falsely portray their products or services as sustainable.
According to Reuters, Deutsche Bank-owned DWS claimed to be a “leader” in environmental, social, and governance investing — a strategy that considers a company’s environmental impact, including factors such as carbon pollution and climate adaptation strategies. The asset manager also said that ESG was a vital part of its operations.
However, German state prosecutors said these claims “did not correspond to reality” after an investigation revealed that DWS deceived investors from mid-2020 to the beginning of 2023. Prosecutors said the fine was for violations of German investment regulations, but DWS claimed its actions were simply a “negligent infringement,” according to Reuters.
The fine follows a $25 million settlement DWS reached with the U.S. Securities and Exchange Commission in 2023 over misleading claims associated with ESG investing and for inadequate policies to prevent money laundering.
DWS agreed to pay the most recent fine, according to Reuters, and stated that it has made changes to ensure the accuracy of its records.
“In recent years, we have already publicly acknowledged that … our marketing was sometimes exuberant. We have already improved our internal documentation and control processes, and we continue to do so,” DWS said, per Reuters.
Greenwashing in asset management is detrimental because it erodes investor trust, creates confusion, and can lead to financial and reputational risks for both asset managers and investors. It also undermines the credibility of sustainable investing as a whole.
In the bigger picture, greenwashing hampers progress on climate solutions and gives the false impression that environmental issues are being addressed when they’re actually not. The Forest Stewardship Council International cited a study by RepRisk that found that 25% of climate-related ESG risk incidents between September 2022 and September 2023 were linked to greenwashing.
Greenwashing is not only bad for the planet, but it also exploits consumers who believe they’re investing in or buying from a company that is actively working to improve the environment. When companies are caught greenwashing, it can lead to a loss in sales and growing distrust from the public.
One real-life example of alleged greenwashing is the so-called environmentally friendly Apple Watches, which are at the center of a lawsuit against Apple. Customers have claimed that the company’s tree-growing initiatives to offset carbon pollution are misleading.
Another is Inditex, the parent company of fast-fashion retailer Zara, which claims to be committed to reducing carbon pollution, yet its amount of heat-trapping pollution increased from 2023 to 2024.
Consumers and shareholders are increasingly calling companies out for making misleading claims about their environmental practices.
A shareholder of oil and gas giant Santos sued the company in 2024 for making empty promises about slashing its carbon pollution, marking a world-first greenwashing case. Similarly, the U.S. Supreme Court ruled that Honolulu officials can move forward with a lawsuit against the fossil fuel industry for a purported decades-long misinformation campaign.
As consumers, we can protect ourselves from greenwashing by knowing how to spot it and using our purchasing power to support eco-friendly companies that are transparent about their environmental impact.
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