We are living in a time of economic tectonic plates shifting beneath our feet. Two weeks ago, the IMF revised its global growth forecast for 2025 downward—from 3.3% to 2.8%—citing rising trade tensions and widespread policy uncertainty. This came after the April 3rd sell-off, which erased $2.4 trillion from the S&P—the worst one-day loss of economic value since early COVID – while the Mexican stock exchange dipped over 5% along with other markets in emerging economies.
As we return to volatility, development finance may see increased demand from the private sector in emerging markets and developing economies, as it navigates the shocks of development aid budget decreases and tightening fiscal belts.
Stability as a Strategic Asset
What likely emerges from this scenario of recessionary pressure is a flight to quality for private capital—a trend that will challenge EMDEs most acutely.
There is already a massive global gap in achieving the UN Sustainable Development Goals (SDGs) valued at US$4 trillion annually. Now, the latest World Bank research suggests an estimated loss of $500 billion annually in private investment from a lack of clear and consistent regulatory certainty. With higher demand for financing expected along with rising costs of capital, development finance institutions (DFIs) may be asked to do even more. This confluence of factors creates a moment for stronger multilateral cooperation and greater focus on host-country needs.
As FinDev Canada concludes its participation in the IMF/World Bank Annual Meetings, its leadership in the G7’s DFI strategy echoes more important than ever as a platform to leverage the private sector to innovate, create jobs, and develop markets to help address global challenges.
The Spring Meetings and the traction of the G7 DFI strategy led to three takeaways for how DFIs and the broader system can advance support to EMDEs to achieve the UN SDGs and the goals of the Paris Agreement.
Towards greater de-risking and capital mobilisation
1. First is the opportunity for greater de-risking and capital mobilisation. Aligned with the Canadian Presidency’s priorities of economic prosperity and partnerships, this year’s G7 DFI strategy is centered around advancing private capital mobilisation while building coherent sector strategies.
The G7 Infrastructure Investment Advisory Council, co-created with the Investor Leadership Network (ILN), is one such pathway to accelerate private capital mobilisation through co-investment and blended finance solutions in infrastructure.
Despite the shared interest between DFI and private investors and the importance of PCM for infrastructure in the eyes of the G7, there’s currently no streamlined structure for the groups to consult G7 policymakers and advance this shared agenda. The G7 Infrastructure Investment Advisory Council will seek to bridge this gap and tackle themes around climate action and resilience we heard at the Spring Meetings.
IFC 2025 research shows that in 2023, private capital mobilized by MDBs and DFIs reached $87.9 billion—a 24% increase. Mobilization to lower-income countries alone rose even more -- 40%. Yet the multiplier effect underwhelms with every $1 in multilateral investment mobilising $0.50 in private capital. If we are serious about private finance at scale, there is more to explore in terms of de-risking solutions like catalytic equity and blended finance. Domestic financial systems along with institutional investors offer new sources of capital. Our work with the Investor Leadership Network (ILN) and its members seeks to take those next big steps, particularly with institutional investors.
Strength through sectoral collaboration
2. Second is sectoral collaboration underneath the umbrella of private capital mobilisation. The three sector focuses of the G7 DFI strategy include infrastructure and energy, critical mineral development, and sustainable food systems.
Initiatives like the G7 DFI Collaborative on Sustainable Food Systems which this year seeks to establish a shared impact framework that will contribute to the better identification and assessment of investment opportunities for resilient supply chains for food security and nutrition.
Additionally, in March 2025, FinDev Canada in collaboration with the US’s Development Finance Corporate (DFC) and the co-Chairs of Canada’s G7 Working Group on Critical Minerals held a DFI workshop to initiate potential DFI joint action in enabling critical mineral development. This sector is a priority for G7 members states as they seek solutions to the energy transition, economic security, prosperity, and technological advancement.
We welcome the opportunity for the G7 DFIs to articulate a common perspective on our role and actions to support the G7 critical mineral agenda, underscoring the need for further cooperation that is grounded by productive and tangible joint actions.
Aligned with the Partnership for Global Infrastructure and Investment (PGII), the G7 DFI strategy will produce an infrastructure factsheet highlighting DFI investments in infrastructure, opportunities for future collaboration, and innovation in approaches to infrastructure financing in EMDEs.
On October 6th, 2025, FinDev Canada will also host the G7 Development Finance Day. It will be an important moment for us to shore up progress on the G7 DFI strategy and launch new ambition on the private capital mobilisation and infrastructure agenda.
Host country engagement for commitment and accountability
3. Third and underscoring the factors above is the importance of ongoing engagement with host countries. Political will, regulatory reforms, and stronger institutions are essential for enabling environments more conducive to private capital mobilisation across sectors. To be more effective in markets, DFIs rely on country partners, donor countries, and the MDBs to complement the work of development finance with regulatory support and institution-building.
When we look at markets as a whole, we see the value and importance of coherence and continuity across the development finance ecosystem. Examples from South Africa and Mexico highlight how macro reforms led to renewable energy laws and auction markets.
The Road Ahead
Working better as a system is a bold agenda, and the G7 DFI strategy is one of the platforms to support. Our G7 DFI website seeks to be a platform to capture the knowledge and technical expertise along the way. There will continue to be opportunities for collaboration as we prepare to build more traction with institutional investors and other partners at Finance Montreal’s Sustainable Finance Summit and the G7 Leaders’ Summit in June. Stay tuned!