Canada has the prerequisites to be a hub for businesses and technologies helping prepare for the impacts of a warming climate, according to a contributor to a MaRS Discovery District report on the adaptech industry.

With global temperatures up by over 1.4 C compared to pre-industrial levels, scientists say world is at increased risk of more potent or frequent heatwaves, floods, wildfires and droughts.

These conditions could hamper economic growth across many sectors.

Adaptech is a family of technologies that help plan, prevent and recover from these changes. Some examples include an artificial intelligence-powered platform for managing climate-related risks, technologies to prevent wildfires caused by lightning strikes, and water treatment.

The sector could be a growth driver, Toronto-based MaRS and its Berkeley, Calif.-based partner Tailwind Futures write in the Canadian Adaptation and Resilience Innovation Playbook. The report cites a Canadian Climate Institute estimate that for every $1 spent on adaptation measures today, $13 to $15 could be returned.

“Canada gets hit by almost every extreme weather event, so it is a good sandbox to test a lot of the innovation and technologies,” Ana Gonzalez Guerrero, the senior manager of climate and cities at MaRS, said in an interview with Sustainable Biz Canada. As a result, the country could be a strong export market for adaptech.

Where Canada's adaptech industry stands

The report benchmarks the Canadian adaptech industry, which is described as having “relatively fragmented” demand and being “primarily reactive to the impacts of climate change.”

Governments are leading the demand for adaptech. In 2024, federal, provincial, territorial and municipal governments spent over $3 billion on climate adaptation. The funding went to programs such as disaster response and mitigation, fighting wildfires, and water infrastructure improvement.

MaRS and Tailwind Futures found that, of the almost-1,700 Canadian climate-relevant startups it analyzed, 36 per cent offered adaptation and resilience benefits.

Startups focused on climate risk and resilience activities with little or no mitigation benefits, such as water sensors and climate risk analytics, made up 10 per cent of funded climate startups to date. Called pure-play adaptation startups, businesses of this kind have received four per cent of the total funding among climate-themed startups at $706 million.

Dual-benefit startups — those with mitigation co-benefits — made up 25 per cent of all climate-relevant startups and received 21 per cent of funding at approximately $3.5 billion.

MaRS and Tailwind also looked at the climate disclosures of the 27 largest publicly traded Canadian companies that represented $1.52 trillion in market capitalization. The firms were in sectors with high exposure to the impacts of climate change such as energy, banking and materials.

While almost every company on the list (96 per cent) identified climate change as a material threat, only 11 per cent disclosed quantifiable spending on adaptation. Examples include a TELUS strategy to spend $125 million over five years on climate resilience, and Intact Financial spending $27.4 million since 2010 on adaptation research and resilience programs.

Guerrero cautioned the apparent gap between corporate concern and action could be misleading as it only draws upon public announcements and not private commitments. But, “there’s a big gap between understanding that there’s a risk and what you’re able to do to prevent or mitigate those risks,” she added.

Bright spots, hidden gems in adaptech

The adaptech space is expanding, particularly dual-benefit ventures, the report says. There were “sharp” gains between 2020 and 2022, pushed primarily by agricultural technology and infrastructure investments. Investors are comfortable with solutions that match existing climate mitigation markets, the report states.

The report labels startups in the food, agriculture and forestry sectors as bright spots. An example is Concentric Agriculture, a Montreal-based developing microbial products that improve crop yields.

It also lists hidden gems, the companies operating in sectors with high demand but limited innovation ecosystems and not enough capital. Those include Intelligent City, a Delta, B.C.-based company behind a prefabricated mass timber building system, and Skyward Wildfire, a Vancouver-based startup that developed a platform which employs weather models and cloud neutralization technologies to prevent wildfires.

To attract private investment into adaptech, startups must demonstrate “good business cases and exit pathways for ventures in the ecosystem,” Guerrero said.

One way this could be achieved is by highlighting the value of preparation, risk mitigation and avoided costs, the report says. Entrepreneurs are also urged to explore underserved technologies such as rainwater harvesting, air quality sensors, and disease prevention and surveillance.

To cover private funding gaps, the report highlights areas where investors can direct their focus, like wildfire response and flood infrastructure. It also recommends using structured and blended finance tools to support capital-intensive adaptation deployments.

It will also be vital to align policy, capital and innovation around solutions which are in high demand but have little innovation such as water and sanitation or flood management, Guerrero said.