A new study shows that Canada’s spending per capita on research and development (R&D) lags behind its peers, which is weighing on the nation’s climate technology sector. 

A study released last week from Boston Consulting Group’s Centre for Canada’s Future found that Canada ranked second to last on total R&D spending per capita among its peers. The study noted that Canada falls behind other countries in total R&D investment per capita, where low business R&D spending is a “key driver of poor performance.”

“I think we have [a] very clear opportunity for Canada to rethink its approach when it comes to climate tech. And part of this means corporations need to take a thoughtful look at what their climate strategy is and how they're going to get to net zero,” Parham Peiroo, a co-author of the report and partner at Boston Consulting Group, said in a phone interview with BNNBloomberg.ca Monday.

The study said Canadian investors and corporations are “missing” the opportunity to increase their presence in the Canadian climate tech industry. Findings also included the fact that 83 per cent of Canadian private investment in climate tech leaves the country, while 55 per cent of private investment in Canadian climate tech comes from foreign investors. 

“The global push for net zero creates huge opportunities for Canada’s climate tech innovators, but they will need support to survive "valleys of death" and scale to impact,” the study’s authors said in a release last week.


According to data from the analysis, R&D spending in Canada per capita came in at US$700, with 52 per cent of spending coming from business activity, while the remainder came from government or higher education.

“When we look at corporate R&D, we're meaningfully lagging the United States. U.S. corporations have about four [times] more R&D per capita than in Canada. And corporate venture capital is also about two and a half times higher in the U.S. than in Canada,” Peiroo said.

The U.S., which was ranked second behind only Switzerland, hit US$2,000 in R&D investment per capita, with 75 per cent of spending coming from business activity, while the rest came from government or higher education. 

“The opportunities are vast: BCG estimates US$100-150 trillion in new investment will be needed by 2050, while the International Energy Agency believes that half the climate technologies the world will need for net zero are still in development,” the authors said in the release. 

However, the study found that Canada is a leading country in climate tech startups, producing the third-highest number of startups over the past five years relative to its peers. Canada also has a high number of startups per capita, coming in at 12 with a total of 454. 

By comparison, the U.S. produced seven climate tech startups per capita over the previous five years, with a total of 2,319, the study said. 

Additional findings from the study included that Canada falls behind its peer nations in later-stage funding for climate tech startups. The study ranked countries on the share of funding events over US$50 million, it found that seven per cent of funding events in Canada met the threshold. 

However, 12 per cent of funding events in the U.S. were at or over US$50 million, according to the study.

Despite lower levels of later-stage funding, the study said that Canadian startups were emerging as key global players. It found that 12 of the top 100 climate tech startups around the world were Canadian. 

The report’s authors said in the release that investment in Canadian climate tech was up four times compared to pre-pandemic levels.

METHODOLOGY


Investment data used for the study came from Boston Consulting Group’s Green Tech Portal.

Data was derived from public disclosures regarding private equity and debt issuances within venture capital and private equity investments in both “early-growth” and “late-stage” funding rounds, the study said. Data also included “non-debt/equity-backed funding” which included crowdfunding and government grants.