Cleantech agency could resume funding by year’s end, Champagne says

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Ottawa’s cleantech funding agency could resume making investments before the end of the year, but only if an independent expert confirms its board of directors has implemented measures to deal with lapses in conflict-of-interest policy and governance, the minister in charge said Thursday.

Industry Minister François-Philippe Champagne on Tuesday suspended the funding powers of Sustainable Development Technology Canada until the agency adopts a series of steps to prevent future infractions after a five-month investigation found evidence of conflict-of-interest breaches, insufficient due diligence in some funding decisions and programs that go beyond the agency’s mandate from government.

Mr. Champagne said SDTC’s ability to resume funding new projects is solely dependent on how soon the agency, which is seen as crucial to Canada’s cleantech ecosystem, can make the fixes to governance that he has directed. He set a deadline of Dec. 31 for that to be completed.

“The objective is for that period to be as short as possible. If they implement the measures recommended by the independent expert and the independent expert confirms to me that these measures are in place, then we would be able to move on,” he told The Globe and Mail in a brief interview.

“But now we’re more in the implementation phase of that, and once this is done we’re going to be able to reassess the situation and hopefully we can go back to normal operations so that we can help businesses across the country.”

Cleantech executives and venture capitalists have warned that an extended freeze on SDTC grants could be highly detrimental to the many startups that are in the process of lining up financing to advance their projects. Companies that apply for SDTC grants must also line up financing from other agencies and venture capitalists, and industry executives worry outside investors could walk away if delays persist.

As Canada seeks to bolster its position as a leader in climate technology, the worry is amplified by stiff competition, especially from the United States, which is offering hundreds of billions of dollars in subsidies toward green projects. Investors said a lengthy suspension could drive developers to the U.S.

The ministry in charge, Innovation, Science and Economic Development Canada, hired accounting firm Raymond Chabot Grant Thornton last spring to conduct the probe after former SDTC employees made allegations of mismanagement by its CEO, Leah Lawrence, and board of directors, led by chair Annette Verschuren. The complainants had accused the agency’s leadership of breaching conflict-of-interest rules and using SDTC funds to finance ineligible projects, and the report shows some of evidence of that.

After the release of the report, SDTC issued a statement saying the probe had identified “no clear evidence of wrongdoing or misconduct.”

Asked whether he agreed with that statement, after he ordered the corrective measures and the suspension, Mr. Champagne said, “the independent report speaks for itself.”

“They found also that some of the allegations were demonstrated, in the sense that they found facts that support the allegations that were made and that improvements need to be made,” he said.

In the past two days, many current and former employees have questioned why the management and board are being asked to repair their internal processes and policies, but do not appear to be facing consequences for the evidence of conflict of interest and governance breaches the investigators documented.

In response to those questions, the minister’s office said on Thursday that the government has given clear guidelines that the organization needs to meet to be in line with the contribution agreement, and is following the expected due process.

Among Mr. Champagne’s directives: SDTC must ensure there is a clear, consistent and transparent process for declaring real or perceived conflicts of interest. In addition, the board must make sure that all projects receive the same level of due diligence, provide more documentation of project evaluations and better align funding streams with the mandate from the government. He also ordered the agency to invite a ministry official to all meetings of the board and SDTC’s project review committee.

“I expect them to implement all the recommendations, because as government, which is contributing taxpayer dollars to the foundation, we expect the highest standard of governance to be respected. So for me, it’s the integrity of the process,” he said.

SDTC spokeswoman Janemary Banigan said the organization is directing its internal resources to making the necessary changes and bringing in outside expertise to bolster its compliance with the contribution agreement with the government, which guides how it distributes public money. She said the No. 1 priority is implementing the directives “as quickly as possible.”