Citing the importance of reducing greenhouse gas (GHG) emissions, the Business Development Bank of Canada (BDC) is launching its second fund devoted to cleantech, with a $400 million CAD commitment.
Climate Tech Fund II, as it is called, will invest in Canadian climate tech firms that are at the scale-up or commercialization stages. The goal is to scale and deploy low-carbon technologies to help Canada meet its GHG emissions reduction targets.
“Our investment strategy is not about market trends but GHG emissions reduction,” said Jérôme Nycz, executive vice president of BDC Capital.
“Fund II will help preserve and extend Canada’s hard-won leadership position in this strategic sector.”
The fund announcement comes just ahead of the 2022 United Nations Climate Change Conference being held in early November in Egypt. It also arrives at a time when the UN has issued a report warning that the plans most countries submitted as signatories of the Paris Agreement to reduce GHG emissions are still not ambitious enough to limit global temperature rise to 1.5 degrees celsius by the end of the century.
The second fund brings BDC’s overall cleantech fund investments to $1 billion CAD. BDC Capital’s Cleantech Practice was created as a result of a $700 million commitment in the 2017 federal budget. The capital was set to be distributed over the following five years.
The majority of the capital, $600 million, went towards direct investments through Fund I, while $100 million went to existing BDC financing programs, which support cleantech companies through BDC’s branch network using commercial debt, according to a spokesperson for the organization.
BDC’s indirect investments have also included programs like Breakthrough Energy, which received $10 million from the practice.
The $400 million commitment marks the second large venture fund re-commitment that BDC has made in recent months. In September, BDC committed $500 million for Thrive, a women-focused venture fund and program that builds on its initial original Women in Technology Venture Fund.
Much like how BDC renamed its Women in Technology Venture Fund for the second time around, it also renamed its cleantech practice.
“We renamed our fund Climate Tech Fund to highlight our heightened focus on technologies that can materially mitigate GHG emissions,” said Susan Rohac, managing partner of the Climate Tech Fund. “Fund II will help preserve and extend Canada’s hard-won leadership position in this strategic sector.”
BDC’s initial cleantech fund is now fully committed, and claims a portfolio of 50 companies.
Some of its portfolio companies include smart off-grid startup Clear Blue Technologies and EnergyX Solutions, which produces software to help businesses and consumers improve energy efficiency. Half a dozen of the first fund’s portfolio companies have also been named as some of the top cleantech companies globally, including Svante, General Fusion, and GHGSat.
Fund I investments have spanned energy storage, renewables, mobility, built environment, circular economy, hydrogen, advanced materials, alternative protein, carbon capture and more, according to BDC.
A part of BDC’s cleantech practice also includes partnering with global institutional investors and government funding programs to support startups. Some of the Fund I partners that BDC plans to continue to work with for Fund II include a number of federal government agencies, as well as MaRS and Écotech Québec. BDC also invests alongside Canadian and international venture funds and claims that for every $1 invested in Fund I, a further $6 of private sector capital was committed for a total of over $2.7 billion in additional capital.
“With Climate Tech Fund II, we will continue to invest along the full lifecycle of leading-edge, disruptive Canadian firms to support their growth and the deployment of technologies critical for our country to reach net zero,” said Rohac.
For Fund II, Rohac said the typical deals will range between $2 million to $10 million for a first investment, and additional funds may be allocated for follow-on investments. According to Rohac, the bank’s investment strategy is anchored around making the right long-term investments to support Canada’s GHG emissions targets.
Already, Fund II has made its first investment in Genecis, a biotechnology company making compostable plastics from waste materials. BDC added it will be making other investment announcements soon.
BDC expects Fund II to be fully committed within five years, and has added several additional team members to make that happen, bringing the number of staff to 11 people nationwide.
BDC Capital’s fund portfolio also includes three other venture funds besides the Climate Tech Fund and Thrive: a $200 million fund deep tech fund; a $250 million Industrial Innovation Venture Fund; and its Industrial, Clean and Energy Technology (ICE) Venture Fund. It also operates a $250 million growth equity fund, a $300 million growth stage fund, and $160 million in intellectual property development financing
Regarding the Climate Tech Fund, Rohac noted “Our goal is clear: invest in Canada’s highest climate impact companies to accelerate the development and deployment of homegrown low-carbon technologies for domestic and international markets.”