Deutsche Bank Replaces DWS’s Woehrmann After Greenwash Raid

(Bloomberg) -- Deutsche Bank AG's embattled DWS Group Chief Executive Officer Asoka Woehrmann resigned hours after a police raid at the asset manager, the culmination of months of controversy surrounding the executive.

Stefan Hoops, head of the German lender's corporate bank, will assume the top role at DWS from June 10, according to a statement Wednesday. His previous role will be taken by David Lynne, who leads the corporate bank for Asia-Pacific based in Singapore. 

The departure of one of Deutsche Bank CEO Christian Sewing's former close allies underscores the rising pressure since former DWS chief sustainability officer Desiree Fixler's allegations that the company inflated its ESG credentials. The raids add to a growing list of regulatory and legal headaches for Sewing after law officials swooped into both firms in Frankfurt on Tuesday.

DWS shares fell as much as 8% in Frankfurt on Wednesday, adding to a 5.7% drop the previous day. The stock was down 7.3% at 31 euros ($33) as of 1:05 p.m. local time.

“The allegations made against DWS and me over the past months, including personal attacks and threats, however unfounded or undefendable, have left a mark,” Woehrmann wrote in a farewell message to staff seen by Bloomberg. “They have been a burden for the firm, as well as for me and, most significantly, for those closest to me. So it is with an extremely heavy heart that I have agreed with the firm to resign.”

The greenwashing probes also underscore the growing scrutiny of money managers and their sustainability claims as demand for ESG investments soars. Assets tied to environmental, social and governance issues are expected to surge to more than $50 trillion by 2025, or about a third of global assets under management, according to Bloomberg Intelligence.

“Asset managers, especially those operating in markets such as Europe and the US, need to make sure they can support their ESG claims given regulators' scrutiny of greenwashing,” said Mak Yuen Teen, a professor at the National University of Singapore who researches corporate governance.

For Woehrmann, the raid was another blow after he faced scrutiny over his use of personal email for business purposes and the role his relationship with a German businessman played in deals. 

While the negative news flow around DWS in recent months had annoyed the bank's top brass, Bloomberg has reported, Sewing had stood by Woehrmann. Earlier this year he said that the executive had “done an outstanding job” and in Wednesday's statement thanked him for his “impressive work and performance.”

He took over the DWS job in 2018, soon after the asset manager's poorly-received initial public offering. Investors had yanked billions of euros from its funds and Sewing asked Woehrmann to turn the asset manager around after he'd impressed him running the bank's German retail operations. He managed to stem the outflows and morale improved. 

Woehrmann also slashed costs at the asset manager while boosting revenue. The firm last year achieved the highest pretax profit since before its listing four years ago.

Like Woehrmann before him, Hoops is close to Sewing and he has spent his entire career at Deutsche Bank, most of it in the trading unit before Sewing tapped him in 2019 to turn around the flagging transaction banking business.

The business was supposed to be a centerpiece of the overhaul but has seen results outshone by those at the investment bank. The unit has faced strong interest-rate headwinds, though Hoops' relentless focus on introducing deposit charges for clients has recently contributed to two consecutive quarters of double-digit revenue growth.

Growing Chorus

The ESG industry has recently faced attacks from a growing chorus of detractors. Jim Whittington, head of responsible investment at Dimensional Fund Advisors, said the sustainability trend is struggling both in terms of real-world impact and returns. HSBC Holdings Plc's asset management unit recently suspended its head of responsible investment after he questioned the sense of focusing on climate change.

The US Securities and Exchange Commission floated tighter rules last week to ensure a product's name is squarely focused on its actual strategy, with most observers fixating on what the restrictions mean for socially responsible investing. The proposals could hit thousands more funds trading everything from value and growth stocks to bonds and emerging markets. 

Misleading Claims

Fixler has said that DWS's claims that hundreds of billions of its assets under management were “ESG integrated” were misleading because the label didn't translate into meaningful action by relevant fund managers. DWS has since stopped using the label.

Woehrmann fired former sustainability officer Fixler in March last year, saying in a memo to staff that her unit hadn't made enough progress. She sued for unfair dismissal but lost the case before a Frankfurt labor court in January.

Still, ESG assets have continued to pour into the bank. DWS funds saw record net inflows of 48 billion euros ($51 billion) in 2021, with ESG products accounting for 40% of the total, according to a press release. 

(Updates with shares in fourth paragraph, timeline lower)

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