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Green gremlins

The hidden fraud risks in ESG branding

Having an environmental, social and governance strategy has become all-important for companies. But as criticism over misleading and fraudulent claims grow, regulators are clamping down and pushing to clarify ESG disclosure rules. As they do in financial reporting, CFEs will have a big role to play in this hot but nascent corner of the market.

When Desiree Fixler was hired in 2020 to be the first head of sustainability at DWS, she and her colleagues soon found gaps and weaknesses in how the German asset manager reported and analyzed its environmental, social and governance (ESG) capabilities.

Such problems are common across industries as companies struggle to adopt ESG models, which are often complex and still in their infancy. But on the eve of the release of the company’s annual report, Fixler felt that some issues required urgent attention, particularly how DWS had reported the size of its ESG assets under management.

She quickly told top executives and raised the issues again when some of the wording in a draft of the 2020 annual report contradicted those findings. Management’s response was surprising.

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