German fund manager joins forces with Frankfurt-based ESG specialist to ripen AI and machine learning's role in sustainable investing.

In a move to strengthen its digital offering, including ESG screening, the German asset manager DWS is taking a minority stake in fellow German Arabesque S-Ray.

DWS has acquired a 2.68 per cent stake in Frankfurt-based Arabesque and both companies said they will continue cooperating on services, particularly ones dependent on using machine learning and the still fledgling AI. As part of this, DWS also confirmed that it is in exclusive talks with Arabesque for a “significant minority stake” in its AI engine.

The deal gives DWS immediate access to Arabesque’s ESG screening tools that are used by thousands of listed companies. The system reportedly processes over 200 environmental, social and governance (ESG) metrics using inputs from over 30,000 sources published in over 170 countries, which are calculated through machine learning algorithms.

DWS said that it plans to use S-Ray’s scores to bolster its own ESG engine.

”Sustainability is at the core of what we do. We want to continue to deliver new solutions to our clients and make even better investment decisions for them in this paradigm-shifting era. Our investment in and cooperation with Arabesque S-Ray is another step for DWS towards taking a leading position in the field of sustainable investment”, said Asoka Woehrmann, CEO of DWS.

The Deutsche Bank-owned asset manager has had a tough time since its listing last year aimed at reviving fortunes at Germany’s largest fund manager. Chief executive Nicolas Moreau, who took the firm through the IPO and a rebranding, was fired last October amid a stream of outflows and senior management churn. Deutsche Bank kept a majority stake in DWS after the 20-per cent float in March 2018 when it raised €1.4 billion ($1.59 billion). Depending on the shake out at the parent - as Deutsche plans to shed thousands of jobs in the next two years to refocus the business - DWS could be a sales target.