Smart cities innovators continue to receive the lion's share of funding in Canada's sustainable property technology industry, according to a report by Sustainable Proptech Canada.

Just under US$3.5 billion (all figures US) has been invested into Canadian property technology (proptech) companies, a figure that includes all public funding data the Toronto-based organization could uncover.

New funding for the sector during the past year (May 2023 to September 2024) totalled almost $823 million, the report states. Smart cities initiatives received about $2.1 billion of the overall total, and just under $495 million of the funds during the past year (about 60 per cent). 

Geographically, over 40 per cent went to Ontario-based companies, followed by firms in Alberta (26 per cent) and Quebec (21 per cent).

“Notwithstanding the poor economic environment, companies in the space attracted almost a billion dollars in new funding . . . Sustainability has outperformed the market generally. The fact that these companies have been able to attract capital is a silver lining in a dark economic time,” Joanna Creed, co-founder of Sustainable Proptech Canada, told Sustainable Biz Canada.

Sustainable Proptech Canada, co-founded by Creed (the group's director of operations and general counsel), and Venturon founder and managing partner Deena Pantalone, publishes a breakdown of players in Canadian sustainable proptech. It acts as a professional network for the industry.

Concord, Ont.-based Venturon is a real estate technology investment group that publishes the reports in conjunction with Sustainable Proptech Canada.

Proptech funding continues to rise

The 131 companies it tracks were organized into four categories: smart cities, sustainable construction, asset management and analytics/research.

Smart cities, which have received 60 per cent of the total funding to date in sustainable proptech, include a diverse range of services such as smart grids and clean energy (including Amp Energy), geothermal energy providers (Diverso, Eavor, Subterra), electric vehicle charging (SWTCH) and carbon capture (Carbon Engineering).

The broadness of the category (covering mobility and the energy transition) meant it received more capital compared to the others, Creed explained. Approximately $495 million was invested into smart city enterprises from 2023 to 2024. Last year’s report showed smart cities took 51 per cent of total funding.

A surge in interest for modular construction led to its addition as a subsection under sustainable construction. A possible solution to the looming construction labour shortage lies with innovators like Assembly Corp., Axe Buildings and CABN, Pantalone said. Panelized construction saves time, costs and is better for the environment, she added.

Sustainable construction took $205 million in funding from 2023 to 2024, and has taken $705 million overall.

Asset management encompasses technology providers that aid in operating buildings with greater environmental consideration. Ecobee, Eddy Solutions and Kontrol Technologies Corp. lead the category in funding and maturity. Under $530 million has gone to asset management companies so far, with $92.7 million from 2023 to 2024.

Analytics/research companies like Refined Data, Manifest Climate, Audette and EnergyX Solutions open a window into the data that allows organizations to take action on sustainability. The field has received $157 million to date, and $30.5 million from 2023 to 2024. 

Funding to Alberta-based companies tripled proportionately, going from seven per cent in last year’s report to 21 per cent in the latest. 

Creed said “outsized funding rounds” were noted for smart cities companies based in Alberta. It does not, however, represent a shift from Ontario to Alberta, she explained, as these regional variations have happened before. A recent example is CarbonCure Technologies’ 2023 fundraise that accounted for almost all the growth in Halifax.

The threats and opportunities for sustainable buildings

A real estate sector slammed by decades-high inflation and elevated interest rates puts research and development (R&D) budgets first on the chopping block, Creed said.

As a result, “any innovation for R&D projects and that includes new business models and new technology, has to really prove its value and show an ROI (return on investment) in near- and short-term, rather than longer-term projects.”

Those regulations include expectations for the Toronto Green Standard to become more stringent, and mandatory reporting of climate-related financial risks for all federally regulated financial institutions.

Adhering to these changes will be a benefit for the bottom line, Sustainable Proptech Canada argues. Adopting low-carbon technologies and certifying office buildings under green standards raises rent premiums. The slowdown in Canadian real estate means asset owners are seeking cost savings, Pantalone said, which can be achieved in part by sustainable practices.

Heightened environmental regulations are another tailwind, Creed said, as the threat of incurring a penalty will move companies toward sustainability.

Moving beyond buzzwords

Sustainability, Pantalone said, is moving past buzzwords. She is seeing proptech evolve from mostly pilot stages to a mainstream practice where asset owners look for financial efficiencies.

In a conversation with Lucie Andlauer, CEO of Subterra, Pantalone recounted Andlauer saying developers and asset owners once had to be persuaded to adopt geothermal energy. Today, they have enthusiasm and awareness of the clean energy source, asking where and when they can incorporate Subterra’s service.

“You can make money and you can reduce greenhouse gas emissions and be profitable while embracing innovation in the space,” Creed said.