Canadian cleantech venture capital financing down over $1B from 2022 peak: Report

Following strong growth earlier this decade, Canadian venture capital (VC) investment in clean technologies has fallen sharply in recent years, down more than $1B in 2025 from its peak in 2022, according to a new research report from the Institute for Sustainable Finance.

The report, titled “The State of Canadian Cleantech Venture Capital Markets” also finds that cleantech startups continue to struggle to attract capital in Canada as they grow. This news comes at a time when geopolitical pressures are rising, climate damage is accelerating, and countries are racing to secure renewable electricity generation, critical minerals and grid capacity to meet growing energy needs such as artificial intelligence.

One of the gaps that has emerged is in private investment. “Our cleantech VC market is dominated by the public sector,” said ISF Director of Research Yrjö Koskinen. “Public capital has achieved quite a bit, but we need more participation from private investors. We are too risk averse in this country. The world is not waiting for Canada to get its act together.”

“Cleantech remains central to the economy of the future,” said ISF Senior Research Associate Yingzhi Tang. “Canada is well positioned to lead. Our geographic and resource advantages give us a real competitive edge but turning that edge into successful Canadian companies requires capital and support from early development through to commercialization and scale.”

The report analyzes a decade of trends in funding innovative startups from early-stage development of nascent technologies such as nuclear fusion to capital-intensive deployment for infrastructure such as EV charging.

Key findings include: 

• Cleantech venture capital had been expanding rapidly, growing from CA$100 million in disclosed deal value in 2016 to a peak of CA$1.65 billion in 2022, before declining to approximately CA$600 million in 2025.
• This is in contrast to a global market which grew by 8% to CA$57.5 billion in 2025. 
• Public capital has been central to the market over the last 10 years. Canadian public investment institutions participated in 33% of domestic cleantech deals, representing 57% of disclosed deal value.  
• The six largest sectors — Electricity and Grid; Industry and Mining; Buildings and City Infrastructure; Fuels, Chemicals and Plastics; Transportation; and Carbon Capture, Removal and Storage — have accounted for roughly 78% of Canadian cleantech deals to date. 
• Cleantech investment is geographically concentrated. British Columbia, Quebec and Alberta account for almost 90% of deal value. 
• The main financing gap is continuity from innovation to scale. Early-stage investment has become a major driver of capital deployment since 2021, but later-stage and growth financing remain inconsistent.  

The most pronounced drop in disclosed deal value came between 2022 and 2023. “It could be that part of the surge in investment in 2022 was a lot of enthusiasm for cleantech and we had some inexperienced investors in the market and some bad deals,” observed Prof. Koskinen. “But we should be over those growing pains by now.”

The report makes the following recommendations: 

• Match financing to technology needs: Cleantech financing should reflect the longer timelines and greater capital needs of hard technologies, using tools such as longer-lived funds, evergreen capital, and public sector risk-sharing, for example for first-of-a-kind (FOAK) solutions.
• Strengthen scale-up financing: Canada can support seed- and early-stage companies but needs more consistent later-stage capital to help cleantech firms scale domestically. Greater participation from public investors, pension funds, banks and private capital could help close this gap.
• Create early demand: Emerging cleantech needs customers as well as capital. Buyer coalitions and public support for pilots could demonstrate demand, validate technologies and attract private investment.
• Strengthen the innovation ecosystem: Better co-ordination among investors, accelerators, public institutions and industry could smooth the path from validation to commercialization. Existing networks could help improve deal flow, information sharing and co-investment.

“Canada has started to build a meaningful cleantech ecosystem over the past decade, and there are a lot of exciting technologies and ideas being funded,” said ISF Research Associate Prateek Sood. “But the market still faces important gaps. Certain types of cleantech solutions require more adaptable financing tools, and in general, there is a lack of scale-up and later-stage financing in the space, which causes many firms to relocate outside of Canada as they grow.”

Download and read the full report: “The State of Canadian Cleantech Venture Capital Markets: Gauging progress over 10 years of sparking the green economy.”