Canada: Funding The Opportunity For Clean Technology Companies

"Budget 2017 proposes to increase financing support for Canada's clean technology sector by making available more equity finance, working capital and project finance to promising clean technology firms. Nearly $1.4 billion in new financing, on a cash basis, will be made available to help Canada's clean technology firms grow and expand." - Canadian Federal Budget 2017


Building on the announcement in the 2016 Federal Budget (Budget 2016), the Liberal government announced nearly $1.4 billion in funding for clean technology companies and projects (clean tech) in the 2017 Federal Budget presented on March 22, 2017 (Budget 2017). Specifically, the funds will be deployed towards:

  • Equity investments to increase capital in a firm without increasing that firm's overall debt load. Budget 2017 proposes to provide additional capital to Business Development Canada (BDC) for clean technology activities. This new capital, along with existing capital under management at BDC and Export Development Canada (EDC), will enable the organizations to offer a combined additional $380 million, to be deployed over three years, in equity financing to support clean technology firms looking to scale.
  • Working capital to support investments in assets, inventory, talent and market expansion. Established companies may need working capital to fulfill a domestic or international contract. Budget 2017 proposes to provide additional capital to BDC for clean technology activities. This new capital, along with existing capital under management at BDC and EDC, will enable the organizations to offer a combined additional $570 million, to be deployed over three years, in working capital to support clean technology firms.
  • Project finance to enable first-of-its-kind, high-capital-intensive, early-commercial-scale clean technology deployment. To attract private sector capital for projects, Budget 2017 proposes to provide new capital to EDC to enable it to offer approximately $450 million in additional project finance for high-capital-intensive clean technology firms.

In light of this announcement and other clean tech funding announcements at the federal level, we thought it would be helpful to provide a high-level overview of some federal clean tech funding programs and assistance and the best way for developing clean tech companies to access them.1

Federal Resources

Several federal departments, programs and crown corporations interact directly with clean tech companies and entrepreneurs.

Concierge Service

The Government of Canada's Concierge Service is a helpful resource that provides access to "Innovation Advisors" with networks, expertise and industry knowledge. It is also a single point-of-access to information on a number of funding programs and tax credits for small- and medium- sized enterprises (SMEs) looking to access federal programs to help them grow or access new markets.

The Concierge Services is a good starting point for clean tech companies looking for guidance on which federal programs are available to them.

Business Development Bank of Canada

BDC is a Crown corporation wholly-owned by the Government of Canada. It provides direct and indirect financing, advisory services and venture or growth and transition capital to SMEs (the latter through its wholly-owned subsidiary, BDC Capital). BDC works closely with EDC and Sustainable Technology Development Canada to support and scale up Canadian clean tech companies.

As part of its clean tech initiative, BDC announced the launch of BDC Capital Industrial, Clean and Energy Technology Venture Fund II (ICE II Fund) on November 23, 2016. The ICE II Fund is a $135 million venture capital fund for energy and clean tech start-ups and is a follow-on to ICE Fund I, which launched in 2011, invested in 18 firms and now has $287 million under management. The ICE II Fund will invest in 15 to 20 new high-impact Canadian start-up firms that demonstrate efficiency and strong scalability. Expect more announcements from BDC and BDC Capital as resources from Budget 2017 begin to be deployed.

Export Development Canada

In the 2016 Canadian Clean Technology Industry Report published by Analytica Advisors, 87% of Canadian clean technology companies were exporters, and 91% anticipate exporting goods and services by 2016 (research conducted in the summer and fall of 2015). Accordingly, Budget 2017 reappointed EDC as a significant source of funding for Canada's clean tech industry and proposes to provide new capital to EDC to enable it to offer approximately $450 million in additional project finance for high capital-intensive clean technology firms.

EDC has a clean tech strategy that focuses on promising Canadian clean tech companies looking to export goods and services to foreign markets. EDC focuses on early commercialization stage companies and offers both financing (i.e., export guarantees and direct lending) and insurance (i.e., trade credit, contract frustration and political risk insurance) solutions for clean tech exporters. They also organize inbound and outbound clean tech trade missions. EDC does not have a formal application process and clean tech companies are encouraged to contact EDC directly to inquire about available solutions for their export expansion needs.

Government of Canada Youth Employment Strategy

The Youth Employment Strategy is the federal government's program to help Canadians aged 15 to 30 obtain and keep meaningful employment and has a focus on green jobs (see Budget 2016). Budget 2017 will expand the Youth Employment Strategy by investing $395.5 million in it over three years, starting in 2017-2018. This investment has as one of its goals the creation of 15,000 new green jobs for young Canadians.

If your business is active in innovation and technology you may be able to access funding to lower the cost of hiring new employees with skills and knowledge of value to your business. Programs include:

  • The National Research Council of Canada Industrial Research Assistance Program - Youth Employment Program/ Youth-Green Program: If you are a for-profit, incorporated businesses with less than 500 full-time employees and are wanting to enhance your innovation capacity, including doing green innovation, you may be able to access funding to hire youth or highly skilled post-secondary graduates. Qualified companies will receive a financial contribution toward supporting a position of the salary costs of a youth candidate.
  • Environmental Youth Corps Internship Program: The Environmental Youth Corps Internship Program gives eligible employers who work in science, technology, engineering, or mathematics, up to 50% of an intern's salary (up to $15,000) for new full-time environmental jobs. Funding is currently fully allocated but applicants can be wait-listed until further funding is received.
  • College and Institutes Canada Clean Tech Internship: The CIC Clean Tech Internship helps connect employers with graduates to grown their green business. Eligible employers in Canada that are addressing climate change or environmental challenges receive a wage subsidy of up to $15,000 to hire an intern in a clean tech position. Interns must be recent graduates, 30 years of age or under, from a post-secondary science, technology, engineering or mathematics program.

Sustainable Development Technology Canada

The flagship fund of Sustainable Development Technology Canada (SDTC) is the Sustainable Development Tech Fund (SD Tech Fund). Since its launch, the SD Tech Fund has invested $928 million in 320 clean tech projects. Budget 2017 proposes to invest $400 million over five years starting in 2017-2018 to recapitalize the SD Tech Fund. On March 13, 2017, the federal Minister of Innovation, Science and Economic Development, announced an investment of up to $20 million to support clean energy projects at the pre-commercialization stage. The SD Tech Fund assists the support and development of pre-commercial clean tech in order to get them to market.

The SD Tech Fund is currently accepting applications and has a helpful questionnaire to determine whether an applicant would be eligible to obtain funding. More information about the application process is available here.

Low Carbon Economy Fund

In Budget 2016 the federal government committed to provide $2 billion over two years, starting in 2017–18, to establish the Low Carbon Economy Fund (the LCEF). The LCEF will support provincial and territorial actions that materially reduce greenhouse gas emissions and are incremental to current plans, and achieve significant reductions within the period of Canada's nationally determined target. Resources will be allocated towards those projects that yield the greatest absolute greenhouse gas reductions for the lowest cost per tonne.

Information about the LCEF is sparse at the moment but check back for updates on the LCEF's formation and application procedures as they are announced.

Natural Resources Canada

Natural Resources Canada (NRC) will also play a key role in clean tech financing. Budget 2017 will provide funding for two programs led by NRC: (i) $229 million over four years, starting in 2018-2019 to NRC and Transportation Canada to continue research and development activities in clean energy and clean transportation programs; and (ii) $200 million over four years, starting in 2017-2018 to NRC, Agriculture and Agri-Food Canada and Fisheries and Oceans Canada for the development and implementation of clean tech in Canada's natural resource sectors.

NRC operates a number of clean tech funding programs in the energy, mining and oil and gas sectors which have been fully allocated but with the funding announced in Budget 2017, expect to see some updates to existing funding programs and new funding programs from NRC.

Footnote

1 This article is not intended to be exhaustive list of all sources of funding for tech and clean tech companies, but should serve as a primer for various sources of government funding for companies focused on clean technology. (This post does not discuss available research and development tax credits that may also be available to clean tech companies.)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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