BDC Capital has launched a new, $150 million CAD venture fund focused on helping Canada meet its sustainability and climate targets.
The Sustainability Venture Fund comes in addition to, and has a different thesis than, the $400 million CAD that BDC committed to its second Climate Tech Fund last year. This is also the Crown corporation rebranding and re-investing in its Industrial, Clean and Energy Technology (ICE) Venture Fund.
As managing partner Joseph Regan told BetaKit in an interview, the Sustainability Venture Fund is a “slightly refined” strategy from ICE that is focused on cleantech.
The Sustainability Venture Fund is a “slightly refined” strategy from ICE that is focused on cleantech
The switch from ICE to Sustainability marks just the latest fund that BDC has revamped in the past year. In 2022 the corporation expanded on the $200-million Women in Technology (WIT) Venture Fund by creating Thrive, and committed an additional half-billion dollars to the project.
The Sustainability name should also help distinguish between BDC’s Industrial Innovation Venture Fund, which is separate from ICE.
Since its inception more than 15 years ago, ICE’s thesis has focused on enterprise companies in areas like data computing, machine learning, and Internet of Things (IoT), as well as industry companies in energy, aerospace, and environmental, social and governance (ESG). ICE’s portfolio spans approximately 30 companies, including GaN Systems, D-Wave, General Fusion, and CarbonCure.
As Regan put it, ICE was “for lack of a better catch-all, cleantech-oriented.” He called the new Sustainability fund an extension of ICE, but one with a strategy that is more focused.
That focus is aligned with four United Nations Sustainable Development Goals (SDGs): sustainable communities and cities; responsible production and consumption; climate action; as well as clean and affordable energy. These are areas that Regan said leverage Canada’s strengths and will help the country meet its sustainability goals.
Regan said investments through the Sustainability fund are meant to help Canada and the world meet 2050 net-zero emissions targets (part of the Paris Agreement of 2015), and noted that BDC has its own commitments to reduce its operational carbon footprint to net zero by 2025.
About a quarter of the emissions reductions that will be required to transition to net zero will need new technology and innovation to achieve, Regan argued. “So that’s where this funding comes in.”
The Sustainability fund’s thesis is to invest in software businesses that are addressing sustainability needs. It will invest in seed through Series B rounds.
Prior to this new fund, ICE managed almost $300 million CAD across three previous funds. That history spans ICE II, which launched in 2016 with $135 million, and the first ICE fund, which was created 10 years prior and had $83 million. There was also a $77 million fund that was BDC’s precursor to the ICE brand.
According to BDC’s own data, Canadian startups in this area have traditionally been underfunded. According to BDC, only five percent of Canadian venture capital went to cleantech in 2021, compared to 14 percent globally. BDC estimates that the scale of overall investments required for Canada to reach net zero by 2050 ranges from $60 billion to $140 billion CAD per year.
BDC’s commitment to cleantech has been sizeable of late. The launch of its second Climate Fund last year brought the corporation’s cleantech fund investments to $1 billion CAD. BDC Capital’s Cleantech Practice (separate from the Sustainability Venture Fund) was created as a result of a $700 million commitment in the 2017 federal budget, which was meant to be distributed over the following five years.
BDC sees the Sustainability fund and the Climate Tech fund as complementary, but different. Regan admitted that as each portfolio grows, and companies evolve, there may be some investment overlap between the two funds. Where they differ is in the type of companies they invest in. While the Sustainability fund will be focused almost exclusively on software or hardware-enabled software, Regan explained the Climate Tech fund intends to invest in more capital-intensive projects to build the infrastructure to reduce greenhouse-gas emissions.
The Sustainability Venture Fund team, led by Regan, will continue to manage the follow-on investing for the other ICE funds. Regan will also continue to be the managing partner for BDC’s Industrial Innovation Venture Fund, which was created with $250 million in 2019 to invest in manufacturing, agri-tech, and extractive industries such as oil and gas.
Feature image courtesy BDC.