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$400M BDC Climate Tech Fund II to back Canadian innovation

Susan Rohac, managing partner of Cleantech Practice at the Business Development Bank of Canada, says its second fund will emphasize climate tech over cleantech. (Courtesy BDC)

The Business Development Bank of Canada (BDC) has launched a $400 million fund to support Canadian climate tech entrepreneurs and innovators developing infrastructure for a low-carbon future.

The BDC, a Crown corporation which invests in Canadian businesses and entrepreneurs, will disperse the funding through the Climate Tech Fund II under the BDC Cleantech Practice.

It follows up on the $600 million Climate Tech Fund I, launched in 2018, that sought to address “the lack of risk capital for the commercialization and scale up of Canada’s cleantech and climate tech industry.”

The second BDC fund is focusing on climate tech (addressing climate change and greenhouse gas emissions), rather than cleantech (minimizing environmental impact).

“We are really going to be looking at full-scale commercialization — how much GHG (greenhouse gas) impact this technology will have. A little more narrow; focused on climate. But it will still be broad and target a lot of the same sectors as we did in Fund I,” said Susan Rohac, managing partner of Cleantech Practice at BDC, in an interview with SustainableBiz.

“We’re trying to send a strong signal to the Canadian cleantech ecosystem that we’re a key ally and that we’re continuing to support this sector."

The Climate Tech Fund II

The new fund will focus on three key “theses and themes” Rohac said.

The first is technology that addresses the priorities of the Canadian economy. Examples include hydrogen energy, carbon capture, the circular economy and electrification.

The second addresses technologies that build and fortify the domestic low-carbon supply chain and production capabilities. These include power electronics, renewable energy, batteries and food. Rohac said the technologies “make us more sovereign as a nation and less reliant on imports.”

The final theme is exploring technology that provides higher-value products on some of Canada’s natural resources. Net-zero mass timber, forestry biofuel, fuels from green chemistry, new green mining, processing technology for battery storage and energy are some of the areas it can support.

She said unlike the first fund, which had $540 million for direct funding, the second fund will have the entire $400 million for direct funding.

“The investment thesis on this one is slightly shorter than the first fund,” Rohac said. "So we think that investment activity per year will stay around the same."

The BDC expects Climate Tech Fund II to be invested over five years.

Building on Fund I

Climate Tech Fund I supported 50 companies in a cross-sector portfolio encompassing food and agriculture, biofuels, the circular economy, carbon capture, electrification and hydrogen.

Rohac named Svante, a carbon capture and removal company in Vancouver, as an example. Other companies in the portfolio include Anaergia, Hydrostor, Peak Power and CubicFarms.

She noted some companies made successful exits and the early-stage portfolio saw some “really good numbers.” The first fund resulted in companies that created over 4,500 jobs, spent over $160 million in research and development every year and made a cumulative revenue of over $1 billion in 2021.

For every dollar invested by Climate Tech Fund I into Canadian companies, an additional $6 of private sector money came in, according to Rohac.

“We want to build on the success of Fund I. We also feel there’s momentum happening right now in the ecosystem. Lots of innovation happening at the early stage of a lot of these technologies. We want to make sure that Canadian companies have the capital they need to continue to grow and scale these really important technologies.”

Canada’s cleantech and climate tech industry

While Rohac said it is hard to pinpoint the size of Canada’s climate tech and cleantech industries, she said she feels it is a “large, robust market” across many different sectors.

In a press release, the BDC says Canada ranks second on the Global Cleantech Innovation Index compared to seventh in 2014. Thirteen Canadian companies were listed on the Global Cleantech 100 list for 2022.

The BDC anticipates the global cleantech market to reach more than US$400 billion by 2026.

Rohac also mentioned the BDC's Industrial, Clean Energy Fund and Industrial Innovation Venture Fund as relevant funds that address similar topics to the Climate Tech Fund.

“BDC really sees these type of companies as the future to economic growth in Canada. And if we can grow that, as well as do good for the environment, it’s just a win-win.”

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