(Bloomberg) – Deutsche Bank AG’s investment arm is removing restrictions, which prevents many of its funds from holding defense assets.
DWS Group CEO Stefan Hoops said in an interview on Wednesday that the move was due to the latest adjustments to Germany’s investment guidelines that could release “ten billions of euros” in the national asset management industry for defense allocation.
This is part of a wider reset of the investment industry across Europe as fund managers from Scandinavia to France seek ways to support an industry that soars in war facing war and ties to the United States. The hub also helped boost return on investment, while defense assets such as Germany’s Rheinmetallurgy AG have only more than doubled their value this year.
Hoops said the industry rules for funding marketing are themselves ESG (environmental, social and governance) that are used to largely exclude weapons manufacturers, but “has changed now.” He said this was also due to the financial performance of the defense department.
In another statement to Bloomberg News on Wednesday, several industry standard setters in Germany’s asset management industry agreed to change a rule called the concept of ESG target markets. The rule was developed in 2021, “the EU has no standard for sustainable products”, excluding many defense investments from ESG funds.
The decision to change the guidelines applies across Germany, enabling the country’s asset managers to open up ESG funds for defense investments.
The statement said DWS is now adjusting documentation of funds using its DWS basic exclusion filter. The change, which will take effect on May 21, will repeal a threshold that prevents funds from holding companies that earn more than 10% of their revenue from defense activities. This will also increase stocks of nuclear-weapon-related companies for free, DWS said.
The statement said the adjustment means that 34 members of the MSCI World Index (2.26% of its weight) will be added to the investable company universe for DWS funds previously subject to defense restrictions. It continues to apply, and the asset manager’s controversial weapons policy does not include cluster ammunition and other weapons.
“The target market concept has to change the industry, and then the prospectus has to change, and then we can change it,” Hoops said in an interview.
Hoops said DWS does not intend to put all the funds unlocked by these adjustments into defense. “But if the problem is, then what quantum can suddenly start investing, that is hundreds of billions of names, and then you can start investing in defense.”
“There will definitely be a catch-up,” Hope said. “There is no doubt.”
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