Canada Growth Fund (CGF)


The $15 billion Canada Growth Fund (CGF) was first announced in the federal government’s 2022 Budget. Many of the CGF’s operational details were laid out in the Minister of Finance’s Fall 2022 Economic Statement on November 3. Nevertheless, a number of questions about the CGF do surface for both the business and public policy communities.

The declared objectives of the CGF include aiding Canada in meeting its 2050 Net Zero target by encouraging more private sector cleantech investment in Canada and countering the pull of the US Inflation Reduction Act on this score. As well, it is clear that the Fund is meant to address, in part, one of the longstanding deficiencies in the Canadian capital ecosystem, namely the relative paucity of domestic growth capital for scale up firms. According to the Technical Backgrounder about the CGF that was released on November 3, “…the CGF will focus on scale up projects, companies and technologies…”(page 6). Currently, data provided by CPE Analytics show that 82 per cent of the growth/late-stage company financings in Canada in 2022 came from US and international investors.

While this scale up funding gap can be seen most acutely in cleantech it is also notably present in life sciences and in the wake of COVID, an ageing population and a health care system crisis, some might find it puzzling that the latter has not received comparable public policy attention and support. In a broader sense, Canada and the world are facing multiple severe crises on a variety of fronts and the logic behind the establishment of the CGF could equally be applied to several other technology sectors where Canada too faces domestic capital scale up funding gaps.

Who’s On First? (apologies to Abbott and Costello)

Perhaps one of the most pressing questions about the CGF has to do with the relationship between it and the other main federal cleantech investment vehicles, namely BDC and SDTC (Sustainable Development Technology Canada). The Technical Backgrounder released by the department of Finance clearly sets out that, “The CGF will not undertake venture capital investing.”(page 4).

The unstated program design assumption appears to be that SDTC is suitable for the earliest-stage firms, BDC for cleantech companies that have progressed to certain venture capital milestones and the CGF for scale ups.

However, the bright line demarcating the future activities of the CGF from its sister organizations might not be quite as apparent as it would appear.

SDTC’s website proudly announces that, “Moving at the speed of business, we catalyze cleantech innovation at every stage.” Further, SDTC’s website contains a section entitled,” Scale Up Fact Sheet – How we evaluate scale up companies for funding.” The organization then informs readers that its scale up investments generally range from $ 2 – $ 5 million and can go as high as $ 10 million.

BDC has both a Growth and Transition Capital unit and a Growth Equity arm. One might wonder if these later-stage investing activities will also include the cleantech sector going forward. As well, the Technical Backgrounder was silent on the question of ‘stacking’ – that is, whether or not companies or funds that secure financing from the CGF will be able to tap other federal sources. The CGF will apparently have the latitude to invest in funds that themselves will invest in cleantech firms. Meanwhile, BDC contains a fund of funds unit that is already an LP(Limited Partner) in two Canadian cleantech funds, ARCTERN Ventures and Chrysalix, according to the crown corporation’s website.

Just as SDTC’s investing activities have bled into the scale up space, it is quite possible that a similar blurred line will manifest itself between BDC and the CGF.

One Ring To Rule Them All (apologies to JRR Tolkien)

The amount of capital at risk, including a further $400 million commitment to BDC’s cleantech fund announced at virtually the same time as the CGF, together with the potential for overlap and duplication suggests the need for a machinery of government solution. This would involve the creation of a single structure for federal cleantech investing that would incorporate SDTC, BDC’s cleantech and the CGF as well as any smaller entities that are active in the space, notably EDC and FCC. Such a solution would also assist in the goal of providing greater public transparency about the entirety of federal cleantech support.

Further Observations and Questions

Domestic cleantech investing in Canada to-date has long been heavily influenced by federal and provincial government funds. SDTC alone reports funding over 140 Canadian companies while BDC’s cleantech fund lists 45 firms in its portfolio. The appearance of the CGF is likely to further exacerbate this dominance, short of it being able to attract a robust cohort of private sector investors to invest alongside it, and of it funding a phalanx of cleantech funds, much along the model of the VCAP, VCCI-1 and VCCI-2 structures.

There are, of course, several other questions that were not addressed in the Technical Backgrounder, including:

What multiple of private sector to public sector (CGF) funding into companies and projects is projected? SDTC’s website outlines the criteria it refers to when assessing scale ups.
Over how many years will the $15 billion be deployed?
What investment size per company/per fund/per project is being targeted by the CGF?

Richard Rémillard

Richard Rémillard is President of Rémillard Consulting Group (RCG), a unique, Ottawa-based, bilingual consulting firm specializing in providing private sector, government & trade association clients with creative, research-grounded solutions to business issues and public policies involving the Canadian financial services industry. For more information:

photo credit: Gerd Altmann via pixabay