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Investment
New report finds VC investment into climate tech growing five times faster than overall VC – TechCrunch
VC and corporate investment into climate tech grew at a faster rate than overall VC investment as a whole between 2013-2019, according to a major new report — to the tune of $60 billion of early-stage capital.
The new research by PwC (“The State of Climate Tech 2020“) found that although it’s still early days for climate tech in terms of the overall VC market (approximately 6% of total capital invested in 2019), VC investment into the space is growing at a clip: it increased from $418 million per annum in 2013 to $16.3 billion in 2019. According to the report, that is approximately three times the growth rate of VC investment into AI over the same period, and five times the average growth in VC.
The reasons are, predictably, to do with market economics. It’s quickly becoming more capitally efficient to prove and scale the technologies involved, and carbon-neutral or even carbon negative solutions have fewer costs than carbon-producing ones.
Nearly half of this venture cash ($60 billion) went to U.S. and Canadian climate tech startups ($29 billion), while China comes in second at $20 billion. The European market attracted $7 billion. The majority of investments for the U.S. and China go to mobility and transport solutions.
Climate tech startup investment in the San Francisco Bay area, at $11.7 billion, was 56% higher than its nearest rival, Shanghai, which reached $7.5 billion. Europe is more invested in renewable energy generation (predominantly photovoltaics cells) and batteries.
Celine Herweijer, global leader, Innovation & Sustainability, PwC UK, said in a statement: “The analysis shows the urgency of the opportunity, and gap to close, to support and scale innovative technologies and business models to address the climate crisis. Climate tech is a new frontier in venture investing for the 2020s.”
“Some of the technologies and solutions critical to enabling this transformation are proven and need rapid commercialization, which is why venture capital is key. It will not need trillions invested in startups to make a difference. But for the trickier technologies and markets it will need targeted support, including from governments, to make it through research and development, and the early stages beyond which capital increasingly is lining up,” she added.
The biggest drivers for growth in climate tech, according to the report, relate to mobility and transport, heavy industry, and Greenhouse Gas (GHG) capture and storage. These are followed by food, agriculture, land use, built environment, energy and climate and Earth data generation.
Anyone who reads TechCrunch will be well aware of the electric scooter and e-bike wars that have broken out in recent years. And sure enough, the report finds that investment in these micromobility startups has grown dramatically, recording a CAGR of 151%, and representing 63% $37.4 billion of all climate tech funding over the past seven years.
Azeem Azhar, senior advisor to PwC UK, founder of Exponential View, and co-author of the report, said: “The climate tech market is maturing. As a society we are seeing more entrepreneurs launch startups, more investors back them, and an increasing number of larger funding rounds for later-stage high-potential deals. But PwC’s analysis shows the ecosystem is still nascent, with key gaps in the depth and nature of funding available to founders and tricky structural hurdles for them to navigate as they scale their businesses.”
Where is the investment coming from? From a wide range of sources: traditional VC firms and venture funds specializing in sustainability, corporate investors, including energy majors, global consumer goods companies and big tech, government-backed investment firms and private equity players.
The report found that corporate venture capital (CVC) looms large in the sector, especially startups typified by high capital costs aimed at disrupting incumbent industries with high barriers to entry, such as in energy, heavy industry and transport. For mobility and transport, 30% of the climate tech deals include a CVC firm, and in energy, 32% of capital deployed came from CVCs. Overall, nearly a quarter of climate tech deals (24%) included a corporate investor.
Herweijer said: “The involvement of corporates will be key to the continued success of climate tech – both in terms of their net-zero commitments driving demand for new solutions, and their investments into commercializing innovation. It’s not just the financial means they bring, but the commercial know-how, and industry knowledge to help startups navigate how to rapidly deploy and scale new innovations into the market.”
Amongst the top 10 cities for climate tech startup investment — outside of the U.S. and China — are Berlin, London, Labege (France) and Bengaluru, India, attracting $1.3 billion, mainly across energy, agriculture and food and land use.
The sections perhaps most relevant to a TechCrunch audience occur on page 44 onwards, which shows that the climate tech market is starting to behave like the high-growth tech startup world. Where barriers existed before, such as technical risk, product risk and market risk, these are being addressed. Recognizable VC names such as Sequoia, GV, Kosler, Horizons, YC, USV are all getting involved.
And although almost 300 global companies have committed to achieving net-zero emissions before 2050, “with just ten years to reduce by half global greenhouse gas emissions to limit global warming to 1.5C, climate tech needs a rapid injection of capital, talent and public-private support to match its potential to build and accelerate faster, bolder innovation,” added Herweijer.
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Compound interest is a thing of magic. It’s also one of your best bets if you’re looking to retire rich.
It might take time and patience but there’s not a whole lot of heavy lifting when it comes to a buy-and-hold investment strategy. What matters most is having decades of time in front of you, which will allow you to maximize the benefits of compounded returns. And, of course, choosing the right investments is equally important.
The magic of compound interest
With a decent return, building a million-dollar portfolio might not be as hard as you think. An initial investment of $15,000, returning 15% annually, would be worth just shy of $1 million in 30 years.
First off, 30 years is a long time, which means you’ll need to be planning your retirement far in advance. However, all it takes is one initial investment of $15,000 and the right stocks to build a $1 million portfolio.
Additionally, it’s important to remain realistic and acknowledge that a stock returning 15% annually is not exactly common. That being said, the TSX certainly has its share of dependable companies with track records of returning far more than just 15% per year.
I’ve put together a list of three Canadian stocks that are perfect for hands-off investors who are looking to retire rich.
Constellation Software
It will require a steep initial investment, but Constellation Software (TSX:CSU) is well worth its nearly $4,000-a-share price tag. When it comes to market-crushing returns, the tech stock has been in a league of its own over the past two decades.
Even as the company is now valued at a massive market cap of close to $80 billion, the impressive returns have continued. Shares are up more than 200% over the past five years. That’s good enough for a compound annual growth rate (CAGR) of 25%.
At a 25% annual return, a $15,000 investment would be worth a whopping $12 million in 30 years.
Descartes Systems
Descartes Systems (TSX:DSG) is another tech stock that’s no stranger to delivering market-beating returns. The company is also only valued at a market cap of $10 billion, leaving plenty of room for growth in the coming decades.
There’s a reason why Descartes Systems is one of the few tech stocks trading near all-time highs today. This stock is a proven winner, with lots of growth left in the tank.
Over the past five years, the stock has had a CAGR just shy of 20%.
goeasy
The last pick on my list is a beaten-down growth stock that’s trading at a serious discount.
The consumer-facing financial services provider has been hit by short-term headwinds from sky-high interest rates. With potential rate cuts around the corner though, now could be an excellent time to be loading up on goeasy (TSX:GSY).
Even with shares down 25% from all-time highs, the stock is still nearing a return of 300% over the past five years.
goeasy was crushing the market’s returns before the recent spike in interest rates, and there’s no reason to believe why the company won’t continue to do so for years to come.
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TORONTO, April 24, 2024 /CNW/ – Flagship Communities Real Estate Investment Trust (the “REIT” or “Flagship“) (TSX: MHC.U) (TSX: MHC.UN) announced today that it has completed its previously announced public offering (the “Offering“) of 3,910,000 trust units (the “Units“) on a bought deal basis at a price of US$15.35 per Unit for total gross proceeds to the REIT of approximately US$60 million.
The Offering was completed through a syndicate of underwriters co-led by BMO Capital Markets and Canaccord Genuity Corp.
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The REIT intends to use the net proceeds from the Offering to fund a portion of the approximately US$93 million aggregate purchase price for the REIT’s previously announced acquisition of seven manufactured housing communities comprising 1,253 lots (the “Acquisitions“) and for general business purposes. In the event the REIT is unable to consummate one or both of the Acquisitions, the REIT intends to use the net proceeds of the Offering to fund future acquisitions and for general business purposes.
The REIT has also granted the underwriters an over-allotment option to purchase up to an additional 586,500 Units on the same terms and conditions, exercisable at any time, in whole or in part, up to 30 days after the date hereof.
About Flagship Communities Real Estate Investment Trust
Flagship Communities Real Estate Investment Trust is a leading operator of affordable residential Manufactured Housing Communities primarily serving working families seeking affordable home ownership. The REIT owns and operates exceptional residential living experiences and investment opportunities in family-oriented communities in Kentucky, Indiana, Ohio, Tennessee, Arkansas, Missouri, and Illinois. To learn more about Flagship, visit www.flagshipcommunities.com.
Forward-Looking Statements
This press release contains statements that include forward-looking information (within the meaning of applicable Canadian securities laws). Forward-looking statements are identified by words such as “believe”, “anticipate”, “project”, “expect”, “intend”, “plan”, “will”, “may”, “can”, “could”, “would”, “must”, “estimate”, “target”, “objective”, and other similar expressions, or negative versions thereof, and include statements herein concerning the use of the net proceeds of the Offering.
These forward-looking statements are based on the REIT’s expectations, estimates, forecasts and projections, as well as assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies that could cause actual results to differ materially from those that are disclosed in such forward-looking statements. While considered reasonable by management of the REIT as at the date of this news release, any of these expectations, estimates, forecasts, projections, or assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those expectations, estimates, forecasts, projections, or assumptions could be incorrect. Material factors and assumptions used by management of the REIT to develop the forward-looking information in this news release include, but are not limited to, that the conditions to closing of the Acquisitions will be met or waived in a timely manner and that both of the Acquisitions will be completed on the current agreed upon terms.
When relying on forward-looking statements to make decisions, the REIT cautions readers not to place undue reliance on these statements, as they are not guarantees of future performance and involve risks and uncertainties that are difficult to control or predict. A number of factors, many of which are beyond the REIT’s control, could cause actual results to differ materially from the results discussed in the forward-looking statements, such as the risks identified in the REIT’s management’s discussion and analysis for the year ended December 31, 2023 available on the REIT’s profile on SEDAR+ at www.sedarplus.com, including, but not limited to, the factors discussed under the heading “Risks and Uncertainties” therein and the risk of the REIT’s plans with respect to debt bridge financing for the Acquisitions not being achieved as anticipated. There can be no assurance that forward-looking statements will prove to be accurate as actual outcomes and results may differ materially from those expressed in these forward-looking statements. Readers, therefore, should not place undue reliance on any such forward-looking statements. Forward-looking statements are made as of the date of this press release and, except as expressly required by applicable Canadian securities laws, the REIT assumes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
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Kim Moody: Ottawa is encouraging people to crystallize their gains and pay tax. That’s a hell of a fiscal plan
The Canadian federal budget has been out for a week, which is plenty of time to absorb just how terrible it is.
The problems start with weak fiscal policy, excessive spending and growing public-debt charges estimated to be $54.1 billion for the upcoming year. That is more than $1 billion per week that Canadians are paying for things that have no societal benefit.
Why? Well, for the CEI, virtually every entrepreneurial industry (except technology) is not eligible. If you happen to be in an industry that qualifies, the $2-million exemption comes with a long, stringent list of criteria (which will be very difficult for most entrepreneurs to qualify for) and it is phased in over a 10-year period of $200,000 per year.
For transfers to EOTs, an entrepreneur must give up complete legal and factual control to be eligible for the $10-million exemption, even though the EOT will likely pay the entrepreneur out of future profits. The commercial risk associated with such a transfer is likely too great for most entrepreneurs to accept.
Capital gains tax hike
But the budget’s highlight proposal was the capital gains inclusion rate increase to 66.7 per cent from 50 per cent for dispositions effective after June 24, 2024. The proposal includes a 50 per cent inclusion rate on the first $250,000 of annual capital gains for individuals, but not for corporations and trusts. Oh, those evil corporations and trusts.
Some economists have come out in strong favour of the proposal, mainly because of equity arguments (a buck is a buck), but such arguments ignore the real world of investing where investors look at overall risk, liquidity and the time value of money.
If capital gains are taxed at a rate approaching wage taxation rates, why would entrepreneurs and investors want to risk their capital when such investments might be illiquid for a long period of time and be highly risky?
They will seek greener pastures for their investment dollars and they already are. I’ve been fielding a tremendous number of questions from investors over the past week and I’d invite those academics and economists who support the increased inclusion rate to come live in my shoes for a day to see how the theoretical world of equity and behaviour collide. It’s not good and it certainly does nothing to help Canada’s obvious productivity challenges.
The government messaging around this tax proposal has many people upset, including me. Specifically, it is the following paragraph in the budget documents that many supporters are parroting that is upsetting:
“Next year, 28.5 million Canadians are not expected to have any capital gains income, and 3 million are expected to earn capital gains below the $250,000 annual threshold. Only 0.13 per cent of Canadians with an average income of $1.4 million are expected to pay more personal income tax on their capital gains in any given year. As a result of this, for 99.87 per cent of Canadians, personal income taxes on capital gains will not increase.” (This is supposedly about 40,000 taxpayers.)
Bluntly, this is garbage. It outright ignores several facts.
Furthermore, public corporations that have capital gains will pay tax at a higher inclusion rate and this results in higher corporate tax, which means decreased amounts are available to be paid out as dividends to individual shareholders (including those held by individuals’ pensions).
The budget documents simply measured the number of corporations that reported capital gains in recent years and said it is 12.6 per cent of all corporations. That measurement is shallow and not the whole story, as described above.
Tax hit for cottages
There are also millions of Canadians who hold a second real estate property, either a cottage-type and/or rental property. Those properties will eventually be sold, with the probability that the gain will exceed the $250,000 threshold.
And people who become non-residents of Canada — and that is increasing rapidly — have deemed dispositions of their assets (with some exceptions). They will face the distinct possibility that such gains will be more than $250,000.
The politics around the capital gains inclusion rate increase are pretty obvious. The government is planning for Canadian taxpayers to crystallize their inherent gains prior to the implementation date, especially corporations that will not have a $250,000 annual lower inclusion rate. For the current year, the government is projecting a $4.9-billion tax take. But next year, it dramatically drops to an estimated $1.3 billion.
This is a ridiculous way to shield the government’s tremendous spending and try to make them look like they are holding the line on their out-of-control deficits. The government is encouraging people to crystallize their gains and pay tax. That’s a hell of a fiscal plan.
I hope the government has some second sober thoughts about the capital gains proposal, but I’m not holding my breath.
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