Canada’s Cleantech companies ready to take bite of US$1 trillion industry
There’s a worldwide movement under way to fight climate change, and it’s supercharging a growing global cleantech market for clean technology from Canada.
Consider these facts:
- China will spend trillions over the next four years on clean water, air, food and energy as it turns from aggressive economic growth to sustainability.
- The EU’s climate change plan calls for a 20 per cent cut in GHGs by 2020.
- In the U.S., the state level drives climate policy. California alone has a bigger economy than Canada, and they have aggressive targets.
- At home, we’ve agreed to a climate change agenda that includes carbon pricing and increased low-emission transport and energy efficient building.
This increasing need, paired with the pace of technological change, is driving the development of new climate solutions and economic opportunities that promise a sustained demand for clean technology.
Estimates are that the global market is worth over US$1 trillion. In low-carbon, energy-efficient technologies alone trade is expected to almost triple to over US$2.5 trillion per year by 2020.
Canada’s cleantech companies capitalize on growth
At home, we’ve made a big investment in clean innovation. The 2017 Analytica industry report says that between 2009 and 2015, cleantech companies spent $8.2 billion in R&D. Many of these are smaller companies.
This investment is ready to pay off. We have a good number of companies ready to compete globally and deliver solid revenues. And they’re an exporting powerhouse.
Consider that we have 850 cleantech companies operating in 10 sectors across the country. Compare that to aerospace with 700 and automotive with 450.
In 2015, these cleantech companies reached over $13 billion in revenue, an eight per cent increase over 2014. 62 per cent of those sales were global.
Scaling to market is the biggest challenge
With all this potential, scaling up to global markets remains the biggest challenge. According to the Smart Prosperity Institute, our global market share has fallen 41 per cent, to 1.3 per cent since 2005.We just can’t get our solutions to market fast enough.
Our cleantech industry faces many challenges commercializing products and services. While there are a number of factors that contribute, in study after study, financing keeps coming up as the biggest hurdle. Many clean technologies are costly and have long production timelines. This combination of high capital needs and long return periods in some sectors makes financing more challenging than in other industries.
The result is that we have a lot of cleantech companies, with great climate solutions, struggling to get into the global market.
Canada could create a $50 billion industry by 2022
It is not too late for Canada to get back in the game.
Many clean technologies are evolving and becoming cheaper. Lower costs and increased demand will make for even stronger export opportunities – if these companies can commercialize.
According to the Analytica report, if we were to achieve a just a two per cent global market share, we could create a $50 billion cleantech industry by 2022. And a strong cleantech industry means a strong economy. The industry employs over 55,000 people in well-paying middle-class jobs and invests heavily in R&D.
Our government is waking up to the economics of this climate challenge. The recent federal budget included $1.4 billion in funding for various types of financing.
Filling the financing gap
In a recent article in Canadian Business, Kate Ballotta, spokesperson for the Canadian Bankers Association, was clear about the challenge the industry faces when it comes to getting bank financing.
… it can be challenging to provide debt financing to firms who do not yet have balance sheets that banks can use as security, or the cash flow to be suitable for traditional debt financing
The challenge for EDC, then, is to support the scaling of firms as they compete in growing markets and move more companies with proven technology into commercialization. While there is more involved in scaling to market than financing, without it, companies can’t acquire the talent and resources they need to compete globally.
At EDC, cleantech has been a priority since 2012 when we realized we could use our mandate, knowledge and skills to support the industry. Since then; we have set up a dedicated team that has the full resources of EDC behind them. We have experience working with the specific challenges these companies face in going global and have tailored our products and services to meet these needs. In fact, since 2012, we have facilitated more than $3.4 billion worth of cleantech export business and helped 170 companies export to 114 countries.
Providing working capital financing that supports growth
Our Cleantech Team has tailored EDC’s financial products to accept more risk, so we can support the unique challenges of early commercialization companies that are ready to compete globally and grow their export revenue.
These products include:
- Growth and working capital financing in the form of loan guarantees, direct loans and bonding
- Project financing for large-scale projects and equity investment
- Risk protection for accounts receivables, equity and assets
We also offer market knowledge and help companies connect with customers and partners because we know that growth requires more than just financing. You can check out our full product and service offering here.
We’re building on our commitment to sustainability and prosperity
As Canada’s cleantech industry continues to grow, our goal is to grow our solutions to service the evolving needs. We want to keep building on the commitment we began in 2012 as well as support the government’s new and aggressive climate change agenda.
A thriving cleantech industry offers enormous economic and climate benefits to Canada and the world, and you can count on us to take the lead on providing the financial services these innovative companies need to scale up to global markets.