Exclusive: UN development boss placed on leave

Preeti Sinha, executive secretary of the U.N. Capital Development Fund, or UNCDF, has been placed on paid administrative leave by the U.N. Development Programme, subject to an investigation into alleged retaliation against an unidentified U.N. staffer.

Sinha, a Swiss national of Indian descent, has vigorously contested the allegation, claiming she is likely the victim of an unjustified complaint by one or more disgruntled subordinates, according to documents reviewed by Devex. The accusation, she contends, coincides with a push by UNDP to sideline her and absorb functions of the quasi-autonomous finance office she leads, and which has the authority to invest far larger sums in private sector enterprises, according to those documents.

She maintains that UNDP Administrator Achim Steiner has taken advantage of the personnel dispute to pressure her to resign — a claim UNDP flatly denies.

“As Executive Secretary of UNCDF, I have been intimidated and threatened by Achim Steiner, UNDP Administrator who also is the nominated UNCDF Managing Director,” Sinha wrote in late October in a confidential letter to UNDP’s ombudsperson, which was seen by Devex.

“When I raised the issue and impact of his actions on the welfare of myself (and consequent defamation), UNCDF and the UN overall, he tried to pressure me into resigning without any due cause explained to me.”

A spokesperson for UNDP sharply contested Sinha account, telling Devex by email that “we refute in the strongest possible terms the allegations and suggestions attributed to the Executive Secretary, including any suggestion that the Administrator ever intimidated or threatened Ms. Sinha or pressured her to resign.”

“The characterization of Ms. Sinha’s confidential discussion with members of UNDP’s senior management … is not accurate and a misrepresentation of the discussions held,” the spokesperson said.

The alleged effort to oust Sinha, which is being reported exclusively by Devex, threatens to open a rift between the U.N.’s principal development agency and the capital fund just as the U.N. is striving to ratchet up private funding to developing countries struggling with historic liquidity and debt crisis. The bureau of UNDP’s executive board, composed of government representatives of five regional groups, has intervened in the case, requesting and receiving a closed-door briefing by UNDP’s internal investigator probing the allegation, according to a diplomatic source.

This story is based on internal documents obtained exclusively by Devex and interviews with more than one dozen diplomats and development experts familiar with the case. All spoke on condition of anonymity, given the sensitivity of the matter, which is currently working its way through the U.N. justice system. Sinha, who was appointed by U.N. Secretary-General António Guterres, declined a request for comment.

Devex’s Editor-in-Chief and President Raj Kumar is on the fund’s advisory board.

Fraught meeting

In early October, Steiner summoned Sinha to return from a donor conference in Switzerland for a face-to-face meeting in New York, where he informed her of the decision to place her on leave, Sinha wrote in the complaint. She also alleges that she was instructed to relinquish her U.N. grounds pass and urged to resign — which UNDP says is not accurate. According to a document obtained by Devex, Sinha was informed that she was the target of an investigation into whether she had retaliated against a staffer in her office whom she suspected of filing a misconduct complaint against her.

“I felt verbally assaulted by Mr. Steiner as if he could not wait to get his hands on my badge,” she wrote in the complaint. “I have no further knowledge as to who my accused at UNCDF [is] and what has been the retaliation? I believe there is a conspiracy to discredit me.”

The details of the complaint against Sinha and the precise nature of the retaliation allegation remain unclear. But in late October, a lawyer for Sinha formally challenged the claim of retaliation in writing to UNDP, insisting that she encountered a hostile environment from some of her subordinates on the fund. The lawyer informed UNDP that Sinha’s principal goal was to be reinstated, but that if it decided against that, she would like to be paid two years’ salary and a commitment by UNDP to clear her name.

The following month, UNDP’s legal office offered Sinha the option of stepping down quietly when her contract expires in February 2023. In exchange, UNDP pledged to send her off with a public statement noting that she had voluntarily decided to pursue other opportunities and praising the achievements of the capital fund during her tenure, according to a document viewed by Devex. The offer was made before the investigation by UNDP’s internal oversight body, the Office of Audit and Investigations, was concluded, according to the document.

A UNDP spokesperson replied that “No, this is not an accurate summary of the situation” when asked whether the agency’s legal office or any other UNDP entity offered to send Sinha off with a public statement.

UNDP calls charges inaccurate

In response to detailed questions by Devex, a spokesperson for UNDP declined to comment on its interaction with Sinha, or her accusers, citing the need to “protect the privacy of the individual.” But UNDP denied it had sought to undermine the capital fund, sideline Sinha, or force her to step down.

“No, this is not an accurate summary — and certainly the Executive Secretary was not “urged” to resign,” the spokesperson told Devex. “UNDP’s regulations, rules and policies have been applied properly and consistently throughout.”

“We are not aware of any activities by Ms. Sinha with respect to concerns about a hostile working environment in UNCDF,” the spokesperson added. “In fact, UNDP management has proactively responded to and supported the Executive Secretary in her own efforts to evolve the operations of the Fund throughout her tenure.”

The spokesperson also said that UNDP and UNCDF “have a very close and constructive partnership in the area of private investment and financing,” and that “in fact, UNDP senior management have convened a number of joint meetings between the two organizations to promote enhanced collaboration in this area.”

The U.N. General Assembly created the capital fund in 1966 as an autonomous anti-poverty financing agency, but it has struggled since its inception to secure significant funding from the world’s wealthiest donors.

The following year, in an effort to boost its financial prospects, the U.N. assembly placed the fund under the provisional administrative control of the better-known UNDP, hoping that it would help raise more funds from donors. Decades later, UNDP’s administrator still serves as UNCDF’s managing director.

The U.N. fund arranges loans, grants, guarantees, and other financial instruments for small- and medium-sized companies in the 46 least-developed countries that are too small for commercial lenders. It also serves as the administrative secretariat for the Global Fund for Coral Reefs and has championed mobile phone technology to allow communities without access to banks to conduct digital financial transactions.

Anxiety stirred

The current dispute comes at a time when UNDP is seeking a broader role in helping to mobilize $1 trillion in public and private finance to achieve the Sustainable Development Goals, including through the creation of the Sustainable Financial Hub in 2019. The hub aims to develop SDG bonds, global standards for private equity funds, and help investors map out investments.

The move has stirred some anxiety within the capital fund that UNDP is seeking to usurp its role — something UNDP denies. Sinha expressed concern that UNDP was seeking to duplicate her fund’s role, asserting in her letter to the ombudsperson that UNDP “seeks to launch the financial instruments itself which are the unique ability of the UNCDF.”

The tension has centered on a reading of UNDP’s rules and regulations, which cap grants to private businesses at $150,000. The capital fund’s charter includes no such constraints, allowing it to arrange larger financial investments and contributions to private development initiatives.

But the capital fund is subject to those constraints when it arranges financing for a program initiated by UNDP. The strict interpretation has “limited UNCDF’s ability to utilize the full breadth and range of innovative financial instruments i.e., grants, loans, and guarantees funded via contributions received from/through a UNDP project/programme,” according to an internal U.N. discussion paper detailing the matter.

The capital fund has sought to negotiate a “special partnership arrangement” that would remove the cap and permit it to arrange larger financial packages, according to the discussion paper, which was produced well before Sinha took on the top job. It was obtained by Devex.

But UNDP has not acted on it.

In May 2021, Pradeep Kurukulasuriya, director and executive coordinator for the Nature, Climate, and Energy program at UNDP, wrote in an email to top U.N. leaders that the grant cap had cost the U.N. maybe tens of millions of dollars in potential programs. He cited several cases in which UNDP was forced to scale back or abandon important projects because the capital fund lacked the fiscal space it requires.

The special partnership agreement, according to Kurkulasuriya, offered a “fix to avoid the lost opportunities of the past and pave the way for forward looking options of the future.”

Kurkulasuriya declined a request for comment, referring questions to UNDP’s spokesperson, who wrote that the rules and regulations establishing the $150,000 cap are set by UNDP’s executive board, which is composed of U.N. member states. But UNDP and UNCDF “are keen to identify ways to effectively deploy both our organizations' capabilities to help countries scale up finance for a range of development solutions.”

That effort, the spokesperson said, includes a review of the use of the capital fund’s rules and regulations, which allow for far larger investments, in joint projects initiated by UNDP.

UNDP, meanwhile, has been exploring the use of new investment and financing initiatives.

In the summer, Steiner launched a 100-day action plan, which included a proposal to explore issuing credit guarantees and risk financing initiatives, according to an internal paper produced by a UNDP private sector task force. The UNDCF already provides similar services.

UNDP’s spokesperson denied the development agency was “erecting its own parallel finance architecture.”

“UNDP’s credit guarantees policy has been developed in consultation with UNCDF,” according to the spokesperson. “Further, UNDP implements programs in over 170 countries, while UNCDF is focused on the 46 Least Developed Countries. As such, it is integral to UNDP’s mandate that we have the ability to provide credit guarantees as an essential development intervention in the broader contexts in which we work.”

Revenue booster

Within U.N. diplomatic and NGO circles, the capital fund has had a decidedly low profile.

Sinha, a former investment and development banker, was appointed by Guterres in February 2021, in part to try and increase its visibility.

During her brief tenure, Sinha helped boost the fund’s profile, bringing together African leaders, including Malawi President Lazarus Chakwera, with representatives of the world’s top banks, investment, and ratings firms, including Citibank, JPMorgan Chase, PIMCO, and Moody’s Investors Service.

During her first year, the agency’s expenditures increased 17% to $100 million from nearly $84 million, according to its 2021 annual report. Revenues from outside donors, including the United States, the European Union, Sweden, Switzerland, and the Bill & Melinda Gates Foundation, have risen nearly 85% to $122 million in 2021 from $66 million a year earlier.

But the fund remains something of a minnow in a sea of far larger multilateral development institutions.

While small, it fills an important gap in developing finance and has some competitive advantages over other impact investing funds, said Nancy Lee, a senior policy fellow at the Center for Global Development, who serves on the UNCDF’s advisory board, but was unaware of UNDP’s decision to place Sinha on leave.

First, it is entirely and exclusively focused on the least developed countries; it has multiple financial tools, including grants, loans, and guarantees that can help get a project off the ground and attract outside investments; and it is part of a U.N. community that has a development presence on the ground in virtually every country in the world, she explained.

“It’s really solving a major gap in capital markets,” said Lee. “It is small but it’s very flexible and that’s what you need when you are operating in these countries.”

In the end, Lee said, the cause of development could be best advanced if UNDP and the UN capital fund drew on each other’s unique strengths.

“There should be a synergy,” she said. The U.N. capital development fund “should be an asset for UNDP. It has the financial tools that UNDP doesn’t have. On the other hand, the [capital fund] can gain access to all of UNDP’s offices around the world to find last mile projects.”