The market panic set off by greenwashing allegations against Deutsche Bank investment arm DWS Group was "excessive," with little to suggest regulators will be able to prove the firm did anything wrong, according to a report by analysts at Citigroup.
"We struggle to see how regulators can hold DWS to account, because sustainability requirements are subjective, making it hard to enforce, even if there was wrongdoing," a group of analysts at Citi led by Nicholas Herman said in a client note published on Monday. "DWS should overcome this issue and its strong ESG focus should pay off over the medium term."
DWS' share price has yet to recover from a sell-off that hit in late August as the market learned of probes by German and U.S. regulators into claims it inflated its environmental, social and governance assets. The allegations, from DWS' former sustainability head, Desiree Fixler, have been vehemently rejected by the firm. But shareholders appear so far to have been unmoved by the denials.
Meanwhile, investors have learned that one probe extends further into the upper echelons of Germany's financial elite than previously known. The country's securities regulator Bafin has contacted DWS parent Deutsche Bank about the role played by the lender's president, Karl von Rohr. He also chairs DWS' supervisory board, and in that capacity signed off on the annual report that's now being investigated for alleged greenwashing.