ESG: Commerzbank and the State of Hesse leave controversial start-up

Frankfurt-based start-up Arabesque has promised a lot since its inception in 2013. First it was about investments and funds compatible with Islam, later the company developed a database for sustainability indicators, then software was added that supposedly invests money with artificial intelligence. . However, the commercial discovery seems to have failed so far. A new idea is about to change this: the latest promise is called “ESG Book”. It replaces the previous data offering called Arabesque S-Ray and, as a global platform for sustainability data, is intended to be a focal point where companies can store for investors how green or social they are.

For this project, Arabesque has now raised $ 35 million from two financial investors and a subsidiary of insurance company Allianz. This is to enable the company to “further develop” and expand its state-of-the-art technology, according to a statement from ESG Book. The partnership is based on a “shared vision for radical transparency in sustainability data,” said venture capital firm Energy Impact Partners, which has partnered with financial investor Meridiam, which also specializes in sustainability. We see a “huge momentum” and the company on the way to becoming the world’s leading platform for ESG data.

These are data that evaluate how much companies pay attention to the environment, social issues and responsible corporate governance (governance). Daniel Klier, CEO of ESG Book and former chief strategist at HSBC, said he was looking forward to the company’s “next growth chapter”.

Existing shareholders sell at a profit

However, some existing shareholders no longer seem to want to participate in this fund. In 2019, several Frankfurt financial groups invested in the emerging company. Deutsche Bank DWS subsidiary and Landesbank Hessen-Thüringen (Helaba) were among them, Commerzbank and IT consulting firm Accenture participated and the state of Hesse invested tax money. In Frankfurt’s rather troubled banking location, the promise of a start-up that is so ambitious about a future-oriented issue is attracting a lot of attention. Celebrities such as former Deutsche Bank boss Jürgen Fitschen or former vice-chancellor Philipp Rösler have taken up positions on the company’s board of directors.

However, the initial euphoria seems to have evaporated for some. In fact, Arabesque has not yet been able to benefit from the green financial investment business, based on the latest published data for 2020. The subsidiary Commerzbank Commerzbank Real (with a share of 4.9%) and the state of Hesse (2.2 %) have now sold their shares, as announced on Thursday. Helaba, DWS and Accenture, on the other hand, have reduced their shares, ie they remain invested without participating in the capital increase.

Commerz Real and the state of Hesse reportedly were unhappy with the commitment, which no investor wanted to comment on. As a venture capital investment, the deal with Arabesque S-Ray became “absolutely reasonable,” a Commerz Real spokesman said. However, because a specific project for the valuation of real estate “is no longer a priority”, they no longer see the need for support and decided to sell it. The minority share was sold to financial investors at a profit.

Controversial business partners

Arabesque Holding, which owned 75% of S-Ray before the capital increase, and its founder Omar Selim were not named in Thursday’s announcement. The German-British company was recently mentioned by, among others, the commitment of Daniel Wruck, a businessman from Wiesbaden with excellent contacts in the Middle East. As a partner of Arabesque, he participated in the gathering of the prominent circle of investors in 2019. He benefited from his political relations, but also from the proximity to the celebrities of the Frankfurt banking industry – including the former boss of DWS investment in Arabesque. Following allegations of “green laundering” and alleged breaches of compliance, Wöhrmann had to resign recently.

Did the new investors demand that the Arabesque S-Ray be renamed, pretending to distance themselves from the former mother? Does all the fresh money flow into the company or is it paid to existing shareholders? An Arabesque spokesman and the CEO of ESG Book left these and other questions unanswered. “Radical transparency” is not so easy in everyday life.

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