A London School of Economics research institute chaired by Lord Nicholas Stern, an internationally renowned British economist and member of the House of Lords, has received 2.15 million USD from the tax payer-funded climate organization Global Green Growth Institute (GGGI), even though he was affiliated with both parties.
GGGI documents and e-mails leaked to Dagbladet Information, Denmark’s independent daily, show that leading GGGI employees warned that there was a possible conflict of interest.
In January 2012, while the contract negotiations were ongoing, a leading GGGI employee wrote an e-mail to GGGI’s then-director general, Richard Samans, expressing concern regarding the process. Among other things he questioned whether the internal procedures had been followed.
»Additionally, there will in all likelihood be an issue of conflict of interest
with our board member, professor Stern. This also has to be clarified with the board prior to signing the proposal,« the e-mail continued.
The deal between GGGI and GRI also worried another leading official. In january 2012, he wrote in an e-mail to other senior colleagues that »Stern’s possible conflict of interest should be resolved before we continue discussions about this contract«.
The money was granted in March 2012, when GGGI signed a two year research contract with the LSE Grantham Research Institute (GRI). Lord Stern chaired the GRI since its foundation in 2008, while he was involved with GGGI from 2010 until November 2013, first as its vice chairman and later as a board member.
GGGI is an international organisation dedicated to promoting the idea of green growth in developing countries. It is funded by development aid from a number of countries, among them Denmark, Norway, Germany and the UK.
In recent months, the organisation has found itself in a number of scandals which have caused problems for the Danish opposition leader and GGGI Chairman, Lars Løkke Rasmussen, and forced the Danish minister for development, Christian Friis Bach, who was a GGGI board member, to resign from government.
In the case of the research grant, concerns voiced by GGGI employees were justified, experts told Information.
»There is a convergence of personal interests and networks in this case, which is very problematic,« said professor Christian Bjørnskov from Aarhus University, an expert on development economics who has studied corruption in the development world.
His assessment is supported by Indira Carr, a law professor at Surrey University and an expert on corruption.
»To an outside observer, there certainly seems to be a conflict of interest. Whether that actually influenced the decision to award the grant to this particular institute, is still a matter to be clarified. It would be appropriate for the donor countries to ask the GGGI to explain the process in details,« she said.
It is not known whether the question of a conflict of interest was cleared with the board, as demanded by the employees. In an e-mail to Information, GGGI said it would not be in line with its disclosure policy to share such information.
The Danish Ministry of Foreign Affairs, which was represented at the GGGI board, »has no knowledge of this particular case,« a spokesperson wrote to Information.
Negotiator in double role
The documents in Information’s possession show that the concerns voiced by the employees were brushed aside by GGGI’s then director general, Richard Samans. In his reply he rejected that there would be any problems, arguing that Lord Stern was not personally involved in the contract negotiations.
But according to professor Bjørneskov, that is not a convincing argument.
»It is not enough to exonerate Stern nor GGGI. It also matters who else took part in the process and whether they were particularly sympathetic towards Grantham and Stern,« said Bjørnskov.
In fact, Lord Stern was not the only person with ties to both GGGI and GRI. People in the climate organisation also wondered why the current deputy director general, the Italian Mattia Romani, who at the time was the director of GGGI’s London office as a secondee from the consultancy firm McKinsey, was involved in the process.
Mattia Romani and Lord Stern knew each other from their work on the Stern team at the UK Government Department of Energy and Climate Change, and according to the GRI, Romani was at the time of the negotiations a senior visiting fellow at the institute. A title he still retains.
»Mattia acts as the analytical lead on projects related to the economics of climate change at Grantham,« the GRI’s website reads.
At the time, Romani also worked as a sort of deputy of Lord Stern. In a diagramme of the organisational structure dated 2011, »support and engagement of Vice Chairman Stern« is mentioned as one Romani’s four »primary responsibilities«.
Despite his affiliation with both Lord Stern and GRI, according to an email from Romani to a number of senior GGGI staffers, he was handling the negotiations with GRI.
In the e-mail, he mentioned a discussion with GRI about which currency the money should be paid in, and whether receipts for expenses related to the research would be held by GGGI or GRI.
The email prompted a reaction from a senior member of the GGGI staff: »Mattia (Romani, ed.) should also stay away from the contract unless he severs his ties with the LSE«, he wrote in an email.
According to the documents, members of the staff also thought that the GGGI was giving too many concessions in the negotiations.
»This contract gave favors to LSE (I don’t know why!),« a senior member of the staff wrote in an e-mail.
Professor Bjørnskov agrees with the GGGI employees that the involvement of Mattia Romani is problematic.
»It is basically the same problem: That he has a history with Stern and that he is affiliated with Grantham. He has a personal interest in that that is where the money ends up,« said Bjørnskov.
In an email to Information, a GGGI spokesperson emphasizes that Romani’s position at GRI »is not remunerated and involves no formal duties.«
But that does not change the fact that Romani had a conflict of interest, professor Bjørnskov says.
»The personal relationship is a problem in itself. If he has a personal connection with Stern, he is disqualified no matter what,« Bjørnskov said.
The discussions among the GGGI staff prolonged the negotiation process.
»Can you confirm whether GGGI are still intending to agree this contract and make payment before December 31st? If so, to expedite matters, we are comfortable receiving payment before receiving signed copies of the contract,« an LSE employee wrote to Romani on the 21st of December 2011.
When that did not happen, complications arose in the relationship between the negotiating parties.
»The situation with the LSE is now tense,« Mattia Romani wrote in an email to the headquarters in Seoul at the end of January 2012.
»As far as I am concerned, I don’t think this needs any further discussion or decision,« he wrote in another email with a call to finalise the process. Related to Romani’s involvement, a GGGI spokesperson wrote in an e-mail to Information: »As formerly director of the GGGI London Office, he was involved in establishing a relationship between GGGI and the LSE, but he was not involved in the assessment of the research grant or in the final decision.«
Romani’s involvement continued even after the contract was signed. In an e-mail dated 23rd of December 2012, the GRI project is mentioned on a list of projects which Romani in the email described as »under my supervision.«
Call for transparency
Even though several senior staff members objected, GGGI’s then-director general signed the contract on the 30th of March 2012 at a meeting in London. In an email to Information, a GGGI spokesperson states that this happened after »extensive internal assessment by GGGI’s teams and Management« and »in line with the practices of other international institutions engaging in such knowledge partnerships.«
There was no tender, however, even though GGGI’s own rules and regulations at the time said that contracts with a value of 100.000 USD or more had to be tendered. There were exceptions to this rule, but the GGGI has not stated which exception that would justify skipping a tender process in this case.
No matter what, the lack of a tender process is problematic, says professor Bjørnskov.
»A process that does not involve a tender is per definition opaque. You also have to have this in mind when considering the question of conflict of interest, since there are other institutions in the world which could have delivered the same research,« said Bjørnskov.
Professor Indira Carr, too, wonders why the contract was not tendered. She urges GGGI to shed light on the matter. That would also be in the organisation’s own interest, she said.
»At the very least any information about why they did not go out to tender would help to allay some of the issues surrounding conflict of interest,« said Indira Carr.
To shed further light on the case, Information has filed a Freedom of Information Act request for the correspondence between GGGI and GRI covering the period of the negotiations. LSE, however, has refused to hand over the material on the grounds that it is so extensive that Information’s request is »beyond the reasonable limit«.
Since the end of November last year, Information has tried to get an interview with Lord Stern, but to no avail. Instead, GRI spokesperson Bob Ward wrote in an e-mail correspondance with Information: » Any suggestion of wrongdoing by the Grantham Research Institute or Lord Stern is without foundation.«
»It is important to note that Lord Stern was not paid as Vice-Chair and member of the board of GGGI, and his research activities are not funded from the GGGI grant, so he has not had any direct financial interest in the award of the grant. Lord Stern played no part in the negotiation of the grant after it was formally submitted by the Grantham Research Institute in October 2011, nor was he involved in the consideration and approval of the grant by GGGI.«
»It would be entirely wrong to imply that his involvement in GGGI at any point was for personal gain.«
Richard Samans, former director general of the GGGI, notifies through the press department at his current employer, the World Economic Forum, that he does not wish to comment. GGGI has, as referred previously in the article, stated its view of the process. »In addition, GGGI does not comment on purported leaks, rumours, or hearsay,« a GGGI spokesperson wrote in an e-mail to Information.
Despite the explanations, professor Indira Carr calls for more transparency:
»In an organisation funded by the tax payers, a maximal level of openness and transparency is of the utmost importance. And based on this case, it certainly seems there is room for improvement,« she said.