A federal cleantech funding agency that has been embroiled in controversy for nearly a year is speaking out, saying an investigation that found it violated conflict-of-interest rules is riddled with factual inaccuracies and ignores key evidence.

Sustainable Development Technology Canada (SDTC), which operates at arm’s length from the federal government, is the main body that distributes public money to fund early-stage green technology projects. The agency has been under a cloud since January, when a group of former employees alleged it had given preferential treatment to projects with close ties to its board and management. The Globe and Mail reported on the allegations in April. 

Innovation, Science and Economic Development (ISED), the federal department that oversees SDTC, hired a consulting firm to investigate the claims and eventually suspended SDTC from granting new funding. 

SDTC sent ISED its response to the report last week, contesting many of the investigator’s findings. The report prepared by the investigator “contains numerous errors, and misrepresentations of our policies and procedures,” SDTC spokesperson Janemary Banigan told The Logic by email. 

Banigan said the agency “categorically” rejects the whistleblower group’s allegations, and has “deep reservations” about the review process the claims triggered.

The investigator, Raymond Chabot Grant Thornton (RCGT), delivered a report to ISED in September after a nearly six-month probe. The report outlined inconsistencies in how SDTC applied its conflict-of-interest policies, and said some of the decisions the agency made about handing out money appeared to violate its agreement with the government. It also highlighted high turnover and “internal culture issues” at the agency. 

In an Oct. 1 letter, a copy of which The Logic reviewed, ISED deputy minister Simon Kennedy told SDTC chair Annette Verschuren that though the investigation “did not reveal any clear evidence of wrongdoing or misconduct,” the department was nonetheless suspending SDTC from granting money. The “inconsistencies” that the investigation uncovered, Kennedy wrote, “could be considered potential breaches of the contribution agreement with ISED.” 

SDTC sent The Logic a copy of its response to the investigator’s report ahead of Monday afternoon’s meeting of the House of Commons ethics committee, at which Verschuren, SDTC’s chair, and CEO Leah Lawrence were scheduled to testify. The committee removed the two from the agenda prior to the start of the meeting. Banigan said the committee didn’t offer a reason for the change. 

The consulting firm that conducted the investigation, RCGT, declined to answer The Logic’s questions, referring them to ISED, which did not respond by deadline.

Innovation Minister François-Philippe Champagne did testify at Monday’s hearing, where Conservative Member of Parliament Michael Barrett pressed him on why he hasn’t fired any SDTC employees or board members in response to the investigator’s report. “I work on the basis of evidence,” said Champagne. 

SDTC is a major source of capital for Canada’s early-stage cleantech ecosystem, providing grants for companies from the seed to scale-up phase. The agency’s funding typically draws private investors into companies it supports. Its annual funding was set to double from $157 million last year to $318 million in 2025–26, and its suspension has sparked worry in the country’s nascent cleantech sector. 

Its suspension has left more than $160 million in potential funding for cleantech startups in limbo, Banigan said. “We have also stopped accepting new applications during the suspension,” she said, “so this will have a ripple effect on the ecosystem for some time.” 

Banigan said there were several instances in which the investigator’s report left out evidence SDTC had shared with them. 

During the COVID-19 pandemic, SDTC gave every firm in its portfolio a relief payment in the form of a five per cent funding increase, said Banigan. The report found that SDTC failed to disclose conflicts of interest with companies to which it made these payments. 

However, SDTC told investigators that before making the payments, it first consulted with an external lawyer, who advised the agency that in this situation it didn’t need to follow typical conflict-of-interest procedures. Because SDTC was treating all recipients the same—and because the relief payments were going to “existing portfolio companies where conflicts were previously declared, the legal opinion was that no conflicts needed to be declared again,” Banigan said. 

Banigan said SDTC gave the investigator a copy of minutes from its board meetings that described CEO Lawrence’s consultation with the lawyer, but that RCGT did not include that evidence in its report. (The Logic also reviewed a copy of the minutes.)

The investigator’s report said SDTC suffered high rates of employee turnover. SDTC argued its rates are comparable to industry averages. “SDTC’s employee turnover in the last year (October 2022–September 2023) is 12.7 per cent,” said Banigan, who pointed to a workforce survey by consulting firm Mercer, which found a 15.5 per cent turnover among Canadian workers in 2022. “This percentage was higher coming out of the pandemic in 2022,” Banigan added, “which is also consistent with broader Canadian labour trends at that time.”

SDTC uses third-party reviewers—typically cleantech experts—to evaluate projects that companies submit for funding. The investigator found that these evaluations aren’t shared with the SDTC committee that reviews the applications. “There may be potential risk that board members may not be making informed decisions, and that some concerns raised by the expert reviewers may be overlooked during the monitoring of the project,” the investigator’s report reads. 

However, SDTC said both the internal committee reviewing applications and the agency’s board of directors have access to all expert review reports, and that it gave the investigator evidence to support the claim. 

The investigator found that Lawrence, SDTC’s chief executive, disclosed a conflict of interest she had with an expert reviewer only retroactively, after being told to by SDTC’s lawyer, and backdated her disclosure. Banigan said Lawrence didn’t initially know of the conflict and disclosed it as soon as she became aware and that the disclosure was not backdated or directed by counsel. 

The former SDTC employees whose concerns led to the investigation complained that the agency was giving money to some companies that didn’t need it—companies that were already generating healthy revenues, or that had raised substantial amounts of venture capital. In its report, the investigator found “elements of commercialization, which is inconsistent with the Contribution Agreement goal of funding companies in pre-commercial development and demonstration stages.” 

SDTC said this finding is misleading, that its goal is to fund pre-commercial projects regardless of whether the companies sponsoring them already have products in the market. 

The Globe and Mail first reported the whistleblower complaints against SDTC in April. Last week, the CBC reported on conversations between a whistleblower and ISED CFO Doug McConnachie that show the department was considering ousting some of the board and management in late August—weeks before the investigation was complete and the report submitted to ISED. 

“Based on the dates of the conversations between the ISED CFO and the former employees that were reported in the media, we have concerns that conclusions were being drawn while RCGT was still collecting information and conducting interviews,” said Banigan. 

While SDTC rejects many of the investigator’s findings, Banigan told The Logic there’s room for the agency to improve its conflict-of-interest disclosure practices. The report noted instances, for example, in which employees or board members declared conflicts but did not recuse themselves from funding decisions. In its response to the investigator’s report, SDTC said the recusals just may not have been documented in meeting minutes. 

ISED has ordered the agency to address concerns identified in the report by Dec. 31, including a third-party review of its human resources practices. Banigan said SDTC is on track to meet the requirements. Ottawa’s auditor general is now also probing the organization’s finances. “SDTC welcomes the OAG’s audit with its additional rigour,” said Banigan. “Our number one priority is to implement the changes recommended by the government as quickly as possible.”