Beats | September 24, 2020

DWS cuts back sustainable investing funds and teams in U.S. shakeup

David Bank
ImpactAlpha Editor

David Bank

ImpactAlpha, Sept. 24 – DWS Group, the $869 billion wealth manager spun out of Deutsche Bank two years ago, has cut back its New York-based sustainable investing team and shelved impact funds targeting microfinance institutions and renewable energy in sub-Saharan energy.

Team members sent farewell notes to colleagues a week ago. Asad Mahmood, who led Deutsche Bank’s social impact investing until 2014, wrote on LinkedIn this week that the firm had “restructured out its impact investing team in New York.”

The reorganization may be less of a referendum on sustainable and impact investing, which has been growing rapidly, than a reflection on internal issues at DWS. Other wealth managers have struggled as well to aligning incentives for advisors, client demands and often unfamiliar impact funds and products that may be smaller and appear more risky than traditional alternatives.

DWS’s sustainable investments team had been organized around financial inclusion and microfinance, financing for social enterprises in agriculture, health and energy, and energy efficiency and renewable energy.

Of the eight team members, three found other positions at the company and five have been let go. The team reported to Andrew Pidden, DWS Group head of sustainable investments in London, who continues to oversee teams in Europe and Asia. A slide on the company’s website indicated the sustainable investment team had 27 members in seven cities. 

In a statement, a spokesman for DWS said, “Our sustainable investment team is global and continues to have a U.S. presence.”

“We remain fully committed to our sustainable investments business and continue to partner with our clients to make impactful investments globally across renewable and clean energy, energy efficiency, corporate supply chains and food chains/agriculture, through a mix of private equity and debt strategies,” the statement continued. “Impact investing is a key component of DWS’s responsible investing capabilities and remains an important area of growth for our strategy going forward.”

The shakeup leaves in doubt the future of Deutsche Bank’s agreement with the Green Climate Fund to raise capital for renewable energy projects in sub-Saharan Africa. The Green Climate Fund, based in South Korea, had committed $78.4 million in first-loss capital that was intended to catalyze as much as $300 million more from commercial investors. 

A microfinance fund that has operated for two decades is likely to wind down as assets are repaid.

In an interview this year, Pidden said the COVID crisis had disrupted fundraising for sustainable strategies. He said like “the impact space took some time to come back into focus,” after the 2008 financial crisis.=

“But then it evolved to become a much bigger area of focus as investors realised that capital allocations increasingly require a social reason for being,” Pidden told The Business Times.

”I expect this to repeat itself, initially with a focus on sustainable food production, waste management and cleanliness (less pollution). It will roll on to fewer flights and less frantic capitalism as people remember time (alive) is more important that money or material goods.”