In the CORE Cleantech Cluster operational framework, Capital was identified as a key component in program planning, and essential to SME success. Capital flow in any industry will drive innovation and change, but for cleantech it is crucial, as cleantech can be capital intensive and sometimes faces greater technology risks associated with the functioning of the technology, scalability and exit requirements than the typical venture capital investment.
Filling the investment gaps identified in both the BC CORE Cleantech Cluster research project, and the Flowing Investment to Scale Cleantech report will be critical to positioning Canada as a global leader in the fast-growing cleantech sector.
The Unsung Hero Award Goes to…
While you’ll have to stay tuned to 2021 for the actual awards and winners, the finance sector in Canada – sometimes saddled with a reputation as being change-resistant or slow-moving – has shown themselves to be the opposite. In terms of cleantech and green financing, there’ve been some innovative and exciting developments that deserve some early recognition.
Funding Our Future: Government Financing and Accountability
The Canadian Net-Zero Emissions Accountability Act announced on Nov 19, 2020 would require the Government of Canada to set emissions goals every five years, including greenhouse gas emission targets every year, a description of what the government plans to do to meet these targets, and report on costs of not meeting 2050 goals. By including a requirement to report on financial risks, the government is sending a signal to the finance sector – climate risk is financial risk, and there is a cost to not acting on cleantech goals (for example, increasing frequency of severe weather events will increase insurance costs due to structural damage to homes and other infrastructure).
The Panel for Sustainable Finance, chaired by Bank of Canada Governor Tiff Macklem has done commendable work on not only creating the framework for how Canada’s financial sector can steer capital to the most-promising sustainable investments, but also for increasing efficiency and stability of Canada’s financial system in the face of climate change by requiring financial institutions to better measure and report on climate-change related risks (food security, water security, national security, financial security, disaster mitigation, insurance costs, etc).
This, along with cleantech-focused programming through government programs such as Sustainable Development Technology Canada, Business Development Bank of Canada, Export Development Canada, Canadian Commercial Corporation, Canada Infrastructure Bank, and more, are driving investment and change, and contributing to the economic and financial well-being of the whole country.
Banks & Venture Capital Funders
The CORE Cleantech Cluster is focused on bringing groups together, closing economic, innovation, and communications gaps, and developing relationships. This means bringing together the spectrum of non-government investors as well — pension funds, commercial banks, family offices, industry funds, and venture capital/private equity firms— to encourage a common pathway, and co-create possible solutions that participants could potentially pilot or invest in.
So, our hypothetical ‘unsung hero’ award must be shared among the whole finance sector, as there has been some excellent progress and innovative work in this area. As Governor Macklim pointed out in a recent speech:
“In financial markets, global issuance of environmental, social and governance (ESG) bonds has exploded in recent years and has not missed a beat so far through the pandemic. The flow of money into ESG funds this year is roughly double that of last year, which was itself about triple that of 2018. More than $US1 trillion of ESG bonds are now outstanding. And Canadian ESG issuance has also jumped—by more than six times in the past three years, going from less than $2 billion in 2017 to almost $13 billion so far this year.”
Programs such as the RBC and Espresso Capital-partnered debt mechanism program, the green and sustainability bonds from HSBC, Toronto Dominion’s recently released Sustainable Bonds Framework (among others) show a responsive financial sector investing in cleantech.
Corporations are also turning their capital toward cleantech, particularly in the traditional natural resource and energy industries as they transition their business models for long-term sustainability. For example, two Canadian pulp and paper companies, Mercer and Resolut, invested in and created a joint venture called Performance Biofilaments, who produce value-added bioproducts derived from wood-fibre. British Columbia’s natural gas company, FortisBC also recently announced their latest fund, Clean Growth Innovation Fund, which is investing in clean infrastructure projects and companies accelerating renewable natural gas, hydrogen, carbon capture and energy efficiency.
Looking Ahead to 2021
There’s no question that 2020 has been a tough year for many businesses. Cleantech, like many other industries, was hit hard by the combined health/economic crisis brought on by the COVID-19 pandemic. As a country, and as an industry, we will need to be resilient and move forward on the path to a sustainable, zero-carbon future.
Congratulations to the finance and corporate sector for recognizing that addressing climate risk is an immediate bottom line business issue and for putting the mechanisms in place to drive growth in this crucial industry.
The CORE Cleantech Cluster is committed to working in collaboration with the finance sector to help bridge financing gaps and create opportunities for Canadian cleantech companies to position themselves global leaders in the transition to a low-carbon economy.
As this sector grows, startup and growing businesses will need innovative capital and financing partners – we look forward to more opportunities to come from the unsung heroes of the cleantech ecosystem.