The climate crisis demands immediate, wide-ranging deployment of decarbonization technology and the most innovative financial institutions are stepping up to the challenge, Vince Gasparro, managing director, corporate development and clean energy finance at Vancity Community Investment Bank (VCIB), told a GLOBE Forum 2022 audience last week in Vancouver.
“We don’t have a lot of time,” Gasparro told a session on the coming boom in climate cleantech investment. “This message has been very clear throughout this conference—we have to deploy capital towards plug and play technologies.”
VCIB’s own experience and growing project portfolio show that the opportunities are out there. But Gasparro said a rapid shift off carbon won’t happen until everyone gets on board.
“We have public sector assets that are readily available, where we can layer on technology to drastically reduce greenhouse gas emissions while generating a return on investment for investors and financial institutions,” he told participants. But “one thing we need to make perfectly clear is that governments can’t do this on their own. Bay Street and Wall Street can’t do it on their own. Silicon Valley, academia, not-for-profits can’t do it on their own. We have to work together” to get the rapid, deep emission cuts that are both needed and achievable.
Gasparro’s remarks followed a question from session moderator Naynika Chaubey, a partner in Vancouver-based venture capital firm Evok Innovations, about the widely-held belief that half of the technology needed to drive down emissions is still at the prototype stage.
In fact, as none other than the Intergovernmental Panel on Climate Change (IPCC) documented in its latest science report this week, “there are real, credible cases out there where we can put our capital and expertise behind founders who are utilizing existing assets.”
Gasparro cited VCIB’s role in financing the world’s largest raw wastewater energy transfer project, a $38-million venture at Toronto Western Hospital recently completed by Noventa Energy Partners. The system captures heat from municipal sewer lines, supplying 90% of the hospital’s heating and cooling and reducing its greenhouse gas emissions by 85%.
It’s the kind of successful, small-scale project that too often falls off the radar when policy-makers and financiers are focused on future prospects for multi-billion-dollar carbon capture schemes that aren’t yet ready for prime time. But this week’s IPCC report said smaller actions and decisions across every economy and society can reduce end- use emissions by as much as 40 to 70%.
The Toronto Western project will be “the equivalent of taking 1,800 cars off the road every year, and it will save the hospital $1 million per year for 30 years,” Gasparro said. “That’s really at the intersection of when you talk about building back better. And even more important, it’s going to help us hit our climate targets.”
During the session, Gasparro and Chaubey joined Yuan Shi, director of Vancouver’s Creative Destruction Lab and Graeme Millen, managing director, technology banking at Silicon Valley Bank Canada, to dig into a cleantech investment trend that’s expected to be bigger than the internet. Shi said new entrepreneurs need capital to be “cautious and patient” until they can find paying customers for their excellent ideas. But Millen said the sector is maturing, with funders introducing more sophisticated commercialization models and more founders showing up with past business experience—and often the scars to prove it.
Millen noted that cleantech currently has access to “an immense amount of capital, not just by volume, but intelligent capital,” from investors who understand the needs of business.
“I don’t think we should discount the fact that Canada has an incredible ecosystem for creating entrepreneurs who want to go out there, have a purpose, and make some money,” Gasparro said. Our country benefits from a stable political climate, an academic system that encourages entrepreneurship, and easy access to U.S. markets—all of which have helped make Toronto, where VCIB is based, the third-largest technology city in North America.
Panelists agreed that a company’s immediate valuation is not the most important question to ask when a founder shows up in search of financing. Gasparro stressed the need for financial institutions to treat entrepreneurs as partners, not just clients.
“One of the things we pride ourselves on at VCIB is that when they come to us for capital—if they need help figuring out their capital structure—we’ll spend the necessary time working with them to grow their business,” he added.
Financial institutions are beginning to realize, and founders already understand, that “if you’re worried about a few basis points on a transaction, you’re missing the bigger picture,” Gasparro noted. “There’s nothing wrong with a cheque, just to be clear. But there are many more things you’re looking for from a banking partner.”
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