Today the Business Development Bank of Canada (BDC), the bank for Canadian entrepreneurs, announced its new C$400M Climate Tech Fund II, a renewed commitment from the BDC to play a leadership role in creating successful Canadian cleantech companies.
This announcement brings the fund’s committed investments in the innovative cleantech and climate tech sector to a total of C$1 billion.
This is the second fund BDC has launched. The company introduced its Cleantech Practice’s C$600M Fund I in 2018 to address the lack of risk capital for the commercialization and scale-up of Canada’s cleantech and climate tech industry.
“What we want to do is to continue to build on the success of Fund One and support Canadian cleantech companies that we feel have two factors that we really want to see. Economic growth for Canada, and supporting companies that can export and grow their employment and their revenues, but also companies that will have an ability to reduce our GHG (greenhouse gas) emissions and help us meet our 2030 and 2050 target goals of emission reduction,” said Susan Rohac, managing partner for the Climate Tech Fund at BDC.
BDC’s first fund supported 50 Canadian cleantech companies, and also supported three likeminded Canadian indirect venture capital funds, making sure the ecosystem had enough money to continue to invest in the sector.
Rohac noted that the fund from 2018 was very successful.
“The companies that we have in that portfolio have been recognized as being some Global Cleantech 100 Winners over the last couple of years, which validates that we’re supporting some of the right companies. Another interesting fact is that for every dollar that we invested directly into those companies, another $6 of private sector money came in at the same time as us or after us, again validating that the companies we’re supporting are able to raise the amount of capital they need to continue to grow and scale,” she said.
According to Rohac, cleantech companies face some unique challenges. The main challenge that BDC is focusing on fixing is that many of these companies have a very capital intensive business model, meaning it takes a while to get to the commercialization stage.
“These companies have to build out first a demo plant and then a pilot plant before they ever get to their full scale plant, and that can take many, many years and lots of capital. So you need investors that are able to continue to support these companies as they grow and need additional capital,” she said. “You need patient investors as well because these aren’t like software companies that you can build in your garage and then sell in two years. So they really do need significantly more capital and longer gestation to get them to full commercialization.”
Some of the companies highlighted in BDC’s portfolio include Svante, a British Columbia-based carbon capture company that captures CO2 directly from industrial sources at less than half the capital cost of existing solutions, and Mississauga-based Silfab Solar, North America’s leading solar panel manufacturer, Rohac added.
“We think it has huge potential to continue to expand, as Canada, the United States, and many other nations are looking to replace their energy with renewable energy. Solar panels will play a big role.”
This latest move from BDC will help support Canada in its sustainability efforts. The country currently ranks second on the Global Cleantech Innovation Index, compared to seventh in 2014. According to the company, the global cleantech market is expected to double in value, reaching more than US$400B by 2026.
“Over 170 countries have now indicated that they want to be net zero by a certain date. And just as many large corporations have also indicated that they’re on route to become a net zero corporation. And I don’t think we’ll be able to achieve that without these technologies and advancing these technologies. So I think it’s critically important that Canada supports our homegrown technologies.”