Fighting climate change, one investment at a time

Our $400M Climate Tech Fund II comes to market at a pivotal time for fighting climate change

12-minute read

Our world continues to warm. We all notice the disruptive impact of climate change in the places we call home. We all need to do our part to fight one of the biggest threats facing humankind.

I was fortunate enough to attend COP 27 taking place in Egypt in November 2022. The international conference on tackling climate change helped give me a global perspective on the complexity of the transition to a green economy.

Every country needs to have its own plan based on its unique situation. Take Canada for example, our oil and gas sector represents a large part of our economy and accounts for about 14% of our exports. Other countries on the other hand mostly draw their energy from imports. India is one of these countries, it imports over 80% of its oil and faces a contrasting set of challenges.

As Canada transitions to a low-carbon economy, it will be put under significant pressure compared to India’s transition which could benefit their job creation, gross domestic product (GDP) and exports. I am not suggesting one set of challenges to net zero is better than the other—but they are certainly different.

The path to net zero must include climate technologies and Canada has an opportunity to play a leadership role.

Technology is key to fighting climate change

What’s clear is that each country’s plan to reach net zero will, to some extent, rely on the commercialization of new technologies. And there are many opportunities for countries to collaborate.

Carbon dioxide removal technologies is one of these opportunities. Direct air, ocean, and nature-based capture solutions, for example, were some of the discussions that made me feel hopeful at COP 27.

Canada has set ambitious net zero 2030 and 2050 decarbonization targets. The path to net zero must include climate technologies and Canada has an opportunity to play a leadership role. The 2023 Global Cleantech 100 report published in January 2023 showcases this leadership with no less than 12 Canadian companies on the list.

Creating world-class Canadian cleantech champions

At BDC, one of our contributions to fighting climate change is finding and investing in innovative cleantech entrepreneurs who can help our country and the world transition to a low-carbon economy.

As one of the largest and most active cleantech investors in Canada, we believe that innovation and investment are fundamental to our country’s ability to meet its climate goals.

We have a long history of investing in this space but recognized in 2018 that more needed to be done. This set the stage for the launch of our Cleantech Practice: a specialized, dedicated cleantech investment team.

Our first job was to deploy the $600 million Cleantech Fund I, to address a chronic lack of private risk capital for the commercialization and scale-up of Canada’s cleantech and climate tech industry. More than four years later, Fund I is fully committed, with $600 million supporting 50 companies.

The Fund also helped catalyze private investment in the sector. For every dollar we've invested with the Cleantech Fund I, our portfolio companies were able to attract another $6 of investment from the private sector. Investing in cleantech is truly a team sport. Every time we're investing it's in close partnership with private sector investors, government and international partners.

We bring this fund to market at a pivotal time, as researchers warn us of reaching a point of no return in the fight against climate change.

A new name and big ambitions

With Cleantech Fund I fully committed, we knew we needed to keep going. This led to the launch of a new Fund, which we renamed Climate Tech Fund II to highlight our heightened focus on technologies that can materially mitigate greenhouse gas emissions.

The size and scope of BDC’s $400M Climate Tech Fund II is a strong signal to the ecosystem that we are a key ally and that we want Canada to be a powerhouse on the global stage. Our new Fund has a full lifecycle approach to investing, meaning it invests at late-stage seed and beyond.

Our goal is clear: Invest in Canada’s highest climate impact companies to accelerate the development and deployment of their technologies for both domestic and international markets.

Scaling up to global markets is a big challenge we are ready to take on alongside our portfolio companies and partners.

The data on cleantech investment speaks for itself: Only 5% of Canadian VC investment went toward cleantech in 2021—versus 14% globally. We must accelerate investment in sustainable innovation to reach Canada’s, and the world’s, 2030 and 2050 goals.

Fortunately, an increasingly robust and well-coordinated network of Crown corporations, agencies, departments, and private sector partners have dramatically accelerated Canada’s innovation outcomes in cleantech.

Ranked seventh in 2014, Canada is now ranked second on the Global Cleantech Innovation Index with more and more global institutional investors investing in Canadian cleantech companies. Another hopeful sign.

Greener and more innovative

The Climate Tech Fund II is an integral part of BDC Capital’s commitment toward sustainability and of BDC’s renewed purpose. Our aim is to become a catalyst for a greener and more innovative Canadian economy, powered by entrepreneurial imagination and drive.

Canada has extraordinary climate tech innovators who build extraordinary companies. We are hitting above our weight class in the sector thanks to these entrepreneurs and a strong Canadian cleantech ecosystem. We need to keep providing the capital these innovators require to continue developing technologies, which accelerate outcomes in climate tech and safeguard our future.

One investment at a time, we can help fight climate change.