© Reuters.

Investing.com — Deutsche Bank (ETR:DBKGn) has replaced Asoka Woehrmann, the chief executive of DWS, its listed asset management arm, within hours of German police raiding its headquarters in connection with a greenwashing investigation.

DWS (ETR:DWSG), one of Europe’s largest fund managers, has been fighting allegations for months that it exaggerated the credentials of its so-called ESG funds. The U.S. Securities and Exchanges Commission has been investigating the firm for making misleading disclosures since DWS’s former head of sustainability turned whistleblower and denounced it.

Asset management firms have increasingly relied on the “Environmental, Social and Governance” theme to sell actively managed funds in recent years, having largely lost the battle for broad fund-tracking investment strategies to passive investing specialists such as Vanguard and Blackrock (NYSE:BLK). The ESG brand requires a higher degree of management discretion and analysis that allows the manager to charge higher fees than it otherwise would. DWS’s whistleblower had argued that the majority of funds marketed by the firm with the ESG label didn’t deserve the label.

The SEC’s investigation into DWS has been seen as an opening salvo by U.S. regulators in a campaign against suspected widespread similar abuses in the industry. Last week, the SEC fined Bank of New York Mellon (NYSE:BK) $1.5 million for “misstatements and omissions” about its ESG-themed funds.

Around 50 law enforcement officials had raided Deutsche’s headquarters in Frankfurt on Tuesday morning, in a depressing echo of a decade of repeated scandals and run-ins with law enforcement.

Prosecutors said that “enough factual evidence has emerged” to show that environmental, social and governance (ESG) factors were taken into account in some investments “but were not taken into account at all in a large number of investments,” clashing with the claims made by DWS in the prospectuses attached to its funds. Deutsche says it is cooperating with the authorities.

The episode has put question marks over the achievements of CEO Christian Sewing, who has reduced the once-constant drag of litigation charges on the bank’s earnings and put an end to some of the pay excesses for which it had become notorious.

Woehrmann had been one of Sewing’s first appointees and turned DWS’s performance around after a difficult first year on public markets following its spin-off. He’ll be replaced by Stephan Hoops, head of Deutsche’s commercial bank from June 10.

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