An employee of Greenpeace International has lost 3.8 million euros of the NGO's donations in a risky financial transaction. The scandal could undermine public confidence in the environmental non-Profit organization.
Protests against Gazprom, Shell and whaling: For decades, the environmental organization Greenpeace has made worldwide headlines with its highly visible campaigns. The group's strategy has been simple: More attention means more donations.
But the headlines on Sunday (15.06.2014) are less likely to generate funds. Greenpeace is accused of gambling away its money. Specifically, an employee in the Amsterdam headquarters made currency transactions that speculated on a sinking euro exchange rate - and lost 3.8 million euros ($5.15 million). The employee in the finance department responsible for the loss was fired immediately.
It's not yet known how many German donations were lost in the action. Last year over half a million people in Germany donated money to Greenpeace to protect the Arctic from oil drilling or to fight against nuclear and coal power.
Greenpeace Germany responded promptly. Due to a "serious error" at Greenpeace International in connection with hedging against exchange rate fluctuations, a loss of 3.8 million euros was incurred, Greenpeace Germany admitted. "We greatly regret the loss and would like to apologize wholeheartedly to our sustaining members."
According to Greenpeace Germany's head of communications Michael Pauli, this simply shouldn't have happened. The employee responsible flouted the rules, he told DW, adding "the control mechanisms at Greenpeace International failed to work."
The million-dollar loss also points to a deeper problem. Namely, that the headquarters in Amsterdam works in euros, while the global offices around the world deal with national currencies. So the organization can gain or lose money, depending on changes in the exchange rate.
"Each year, Greenpeace International has to deal with these currency fluctuations," Pauli said. And in 2013, contrary to usual practice, they decided to hedge against these fluctuations, and buy currencies at a fixed rate - a big mistake.
Burkhard Wilke from the German Central Institute for Social Issues is also aware of the problems associated with currency fluctuations. An unfavorable exchange rate could mean a considerable loss for organizations within just a few weeks, he says.
"To some extent, it's also necessary for currency risks to be confronted," he said, adding that an organization can protect themselves by investing their funds in safe haven currencies. "But the limit to currency speculation needs to be observed, and shouldn't cross the line into negligence."
For him, speculation begins at the point where falling or rising prices are set. "One of the key questions that needs to be clarified from our point of view is: Have these losses emerged now because of attempts to hedge against currency risks, or did they result from speculation?"
Hansjörg Elshorst, long-time director of former German aid organization GTZ and founding member of Transparency International, is critical, but he finds the environmental organization's blunder less reprehensible.
"I also expect my staff to invest the money sensibly, not speculatively risky, so that the value of the funds is preserved or increased," he told DW. The problem with these types of operations, he says, is that "there are fluid boundaries between investment and speculation, which is worthy of criticism."
Need for more transparency
Many people see non-profit organizations in the currency business as a kind of paradox. But according to Wilke, some foundations should embrace the practice to make their money go further. That means instead of investing funds in a general account when interests rates are low, funds should be invested in a fixed deposit account, or even in a portfolio.
"I can generally only recommend that donors look at the annual reports," he said. "Many of these reports are also like a very informative business card for NGOs."
There are many misconceptions among the public about how fundraising organizations operate. Wilke believes NGOs should therefore be much more transparent with the way they practice business.
"According to our observations, there is still too much reserve and restraint because organizations fear that there will be a loss of confidence if they make their investment practices public."