The federal government’s scandal-plagued cleantech funding agency will be absorbed by another federal research body, Industry Minister François-Philippe Champagne announced Tuesday. 

The announcement came on the heels of a scathing report Tuesday, in which auditor general Karen Hogan found Sustainable Development Technology Canada (SDTC) mismanaged taxpayer dollars by granting money to companies that didn’t meet the government’s eligibility criteria, and with which directors and consultants had conflicts of interests.

Sustainable Development Technology Canada (SDTC) will become part of the National Research Council of Canada. Its board members have all resigned, with three government-appointed directors taking their place. 

“The various reviews conducted―including the auditor general’s report—have revealed serious weaknesses in SDTC’s governance, prompting a new delivery approach to government support for the cleantech sector,” Champagne said in a statement. 

The National Research Council (NRC) is the country’s main national science and technology research agency. SDTC’s programming will eventually be delivered by the Canada Innovation Corporation, an arm’s-length federal agency designed to help commercialize innovation, and set to be operational by 2027. In the meantime, however, SDTC can resume funding cleantech companies immediately, after being barred from doing so for the last eight months. 

“We’re moving to a model with additional oversight that will allow us to restore confidence and continue support for the sector,” Champagne told The Logic Tuesday afternoon. 

In a review of SDTC’s business from March 1, 2017 to December 31, 2023, Hogan found 90 cases in which the agency didn’t follow conflict of interest policies, representing nearly $76 million awarded to projects. Hogan’s office identified 10 projects that were not eligible for funding, but received about $59 million anyway. Two of those involved conflicts of interest, the investigation found. 

The auditor general also found that Innovation, Science and Economic Development (ISED), the department that oversees SDTC, failed to properly monitor the foundation for conflicts of interest or assess whether it was following its contribution agreements with the government. 

“Like all organizations funded by Canadian taxpayers, Sustainable Development Technology Canada has a responsibility to conduct its business in a manner that is transparent, accountable, and compliant with legislation,” Hogan said in a statement Tuesday. “Our findings show that when this doesn’t happen, it’s not always clear that funding decisions made on behalf of Canadian taxpayers were appropriate and justified.”

SDTC has been shrouded in controversy since a group of whistleblowers lodged conflict-of-interest and governance complaints against the leadership and board last year.

The allegations prompted Champagne, the minister responsible for the federal innovation department, to order a third-party investigation into SDTC. While its findings validated some of the whistleblower complaints, the investigation didn’t find clear evidence of wrongdoing. Champagne nevertheless suspended SDTC from granting new money until the agency implemented a series of corrective measures. 

The saga has included resignations from SDTC’s top personnel, CEO Leah Lawrence and board chair Annette Verschuren. Both have denied all wrongdoing.

SDTC is a major source of public money for early-stage green technology projects in Canada. It provides grants for companies from the seed-to-scale-up phase, and typically draws in private investors. It approved $856 million to 420 projects over the seven-year review period. 

Chief among the conflict-of-interest complaints was former board chair Annette Verschuren’s role in approving pandemic relief grants for NRStor, a portfolio firm of Sustainable Development Technology Canada and a company Verschuren also leads as CEO and board chair. Hogan’s report did not explicitly address the specific claims. However, it noted that in 63 cases, directors voted to approve pandemic relief payment while having previously declared conflicts of interest. 

In a statement responding to the report, SDTC said it accepted Hogan’s findings, but said that its due diligence was more robust than shown by its records—on which the auditor general based the report. “SDTC has strong monitoring processes in place to ensure that every project payment—every dollar—is accounted for and has been correctly disbursed to the innovative cleantech projects and technologies that Canada needs to succeed in the new economy,” it claimed in a statement.  

The organization said it has taken “significant steps to strengthen its conflict-of-interest policies and improve documentation and reporting processes to align with best practices” and has introduced “clearer guidelines for board responsibilities.” 

The NRC will eventually take over all work previously done by SDTC. Champagne said the NRC’s record of supporting innovative tech firms makes it a good fit to manage SDTC. “As a Government of Canada organization, the NRC is subject to rigorous and stringent oversight of its personnel and finances. This structure will help rebuild public trust while increasing accountability, transparency and integrity.” 

SDTC staff will be offered positions at NRC, according to the statement. ISED has also appointed a new chair to SDTC’s board, Paul Boothe, as well as two new directors, Catherine Doyle and Marta Morgan—all three are former senior public servants. 

“We look forward to the next chapter in our evolution as part of the National Research Council,” SDTC said in a statement. “There are significant synergies between our respective mandates, and we will work to ensure this transition is as seamless as possible for the companies we serve.”