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Over the last few years, every time it looked like Deutsche Bank had finally turned a corner and put the better part of a decade of failure and existential crisis behind it, it turned out not to have been a corner so much as a slight curve to the left obscuring some new tire-destroying pothole or mud-filled ditch, leaving whoever was in charge at the time on the side of the road, covered in filth and cursing a blue streak while struggling to get the well-worn donut on or to push the rickety old VW out of muck and mire before it overtook them both, only to be left behind when the beat-up Beetle is finally freed from the slop and speeds off without him on its way to the next hidden catastrophe… oh wait, are those flashing lights and sirens coming up behind it?

Still, hope springs eternal, even in Frankfurt, so when Deutsche announced it had more than doubled analysts’ profit estimates in the second quarter, there’s no doubt that Christian Sewing, James von Moltke and Paul Achleitner rejoiced in the sunshine with full confidence that they’d be able to weather the squall every single headline about the beat made clear was ahead, signaled by dark clouds such as a drop in all-important (if probably fraudulent) investment banking revenue and losses on the retail business. So confident were they that they announced they wouldn’t be firing every possible employee to save money, just some of them.

And what gave them this confidence? Why, their asset-management business. After a year of being driven by the i-bank, when it began to sputter DWS Group hit the accelerator and almost made up the difference. Why, look, there’s a turn just ahead onto Moneymanagementstrasse that might help Deutsche Bank steer clear of that oncoming storm entirely. No, I don’t hear anything untoward coming from under the hood, and I’m sure the check engine light will clear of its own volition and….

Frankfurt-based DWS said in its 2020 annual report released in March that more than half of its assets under management—€459 billion, equivalent to $540 billion—have run through a process it calls ESG integration…. According to an internal assessment of the company’s ESG capabilities a month earlier, “only a small fraction of the investment platform applies ESG integration,” adding there is no quantifiable or verifiable ESG-integration for key asset classes at DWS….

The same month, Desiree Fixler, DWS’s sustainability chief, made a presentation to the executive board saying the firm had no clear ambition or strategy, lacked policies on coal and other topics and that ESG teams were seen as specialists rather than being an integral part of the decision-making…. Ms. Fixler was fired on March 11, one day before the annual report was released. Ms. Fixler said she believes DWS misrepresented its ESG capabilities…. “As chief sustainability officer, as a proponent of ESG, how could I not speak up on wrongdoing,” she said in a statement sent to the Journal. “Posturing with big statements on climate action and inclusion without the goods to back it up is really quite harmful as it prevents money and action from flowing to the right place.”

DWS, which is majority owned by Deutsche Bank but maintains its own stock listing, said in a statement that it has always been transparent to investors and clients, and it stands by its annual report, which was audited by KPMG.

See, the mechanic said everything is fine! Wait, what was that thud? And what’s that muffler-shaped thing lying the road behind us?

The Financial Reporting Council, which oversees the U.K. arms of international auditing firms, said that the performance of Deloitte LLP, Ernst & Young LLP, Grant Thornton UK LLP and PricewaterhouseCoopers LLP had improved from the year before but still fell below expectations, with about 80% of audits assessed as good or requiring only limited improvements…. The Financial Reporting Council said KPMG LLP’s performance was unacceptable. Of KPMG’s audits, only 59% were graded as good or requiring only limited improvements.

Uh, does anyone have Deloitte or PwC’s number? Definitely not asking for James von Moltke….

Fired Executive Says Deutsche Bank’s DWS Overstated Sustainable-Investing Efforts [WSJ]
Deutsche Bank smashes estimates for the second quarter despite slide in trading revenues [CNBC]
Deutsche Bank Posts Surge in Profit but Faces Headwinds [WSJ]
Big Four Auditors Fail to Meet U.K. Regulator Expectations [WSJ]



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