Can Canada do more with less? Suspecting not, the Business Development Bank of Canada (BDC) is launching a new $150 million sustainable technology venture capital fund. That’s a lot and, at the same time, not that much.
Because Canada is one of the countries in the world where sustainable technologies (“cleantechs”) monopolize one of the smallest shares of all venture capital. While the average share allocated to them globally is 14%, in Canada it is 5%.
This is part of the reason BDC is launching a new fund called Sustainable Future, which will specifically target technologies for optimizing and improving the efficiency of systems to reduce greenhouse gas emissions. mainly in Canada, but also internationally. This fund joins the ranks of another 400 million fund launched last fall, which is more interested in more substantial climate technologies. They are accompanied by a third envelope of 250 million, which the BDC intends for industrial innovation and part of which is linked to the sustainable economy.
The BDC thus hopes to help Canada achieve its carbon neutrality target set for 2050. It does so by sticking to 4 of the 17 major United Nations sustainable development goals: sustainable cities and communities, responsible consumption and production, measures relating to fight against climate change and clean and affordable energy.
This new fund will lead to “lighter investments,” says BDC Capital Executive Vice President Jérôme Nycz. “The targeted technologies will not require a lot of capital. They will be found more on the software or application side, in the management of energy networks, clean transport systems, etc.
“Our climate fund targets projects that require a lot of capital to lead to the creation of demonstrators. This fund is aimed at technologies that will improve the efficiency of existing systems,” summarizes Mr. Nycz.
Canada lags behind
Canada, which has set climate targets whose first deadline will be in 2030, invests little in the technologies that would help it achieve its targets. Canada’s venture capital industry, one of the main sources of financing for clean technologies, has boomed since the financial crisis of 2008, but its growth and the size of the investments it has made during the last decade in new Canadian companies remains less than the growth of American venture capital, among others.
Compared to the US sector, Canadian private investors are still few in number, and their portfolios are smaller. The place occupied by funds associated with the federal or provincial government continues to be the majority, even if government programs are designed in such a way that public investment in venture capital is automatically matched by an equal or greater investment from the private sector. .
One of the consequences of this situation is that in the majority of cases, later investments in Canadian technology companies, those generally amounting to more than $100 million, are rarer than south of the border. Or they come from American funds. The young shoots that are born here thanks to money largely advanced by funds linked to governments are therefore likely to fall into the hands of foreign investors. “And when a major foreign investor has a seat on the board of the company, we tend to listen to him”, illustrates Jérôme Nycz.
“At least the days are over when American investors routinely demanded that the company’s headquarters be moved to American soil,” he says. The talent that we have and attract to the country is more likely to stay here. Sustainable technologies that stay in the country are also more likely to address local environmental issues, which is ultimately the goal of aid funds targeting these technologies.