(Bloomberg) -- The market panic sparked by greenwashing allegations against Deutsche Bank AG’s asset manager DWS Group was “excessive” because regulators will have a hard time proving wrongdoing, Citigroup analysts led by Nicholas Herman said.

“We struggle to see how regulators can hold DWS to account, because sustainability requirements are subjective, making it hard to enforce, even if there was wrongdoing,” the analysts wrote in a note published on Monday. “DWS should overcome this issue and its strong ESG focus should pay off over the medium term.”

DWS’s share price has yet to recover from a selloff that hit late last month as the market learned of probes by German and U.S. regulators into greenwashing allegations by former Group Sustainability Officer Desiree Fixler. The German securities regulator Bafin has contacted Deutsche Bank about the role played by President Karl von Rohr, who also chairs DWS’s supervisory board, Bloomberg News reported last week.

The probes have forced the asset management industry to sit up and take note as greenwashing -- a term given to inflated or misleading ESG statements -- draws an increasingly aggressive response from regulators. News of the DWS probe has led investment firms across Europe to review their portfolios to ensure they’re not vulnerable to similar investigations, people familiar with the matter have said.

The Citi analysts said they “question whether any action against DWS by US regulators could disincentivise other firms from providing ESG solutions and disclosures for fear of being caught by unclear regulations.”

“That would not be a desirable outcome,” they said.

Citi also noted “robust” asset flows at DWS in August, but said it’s too early to tell whether the probes have dented investor appetite for the asset manager’s ESG funds. 

©2021 Bloomberg L.P.