Development Finance and Critical Minerals: Opportunities for Supporting Sustainability and Inclusion through Patient Capital

Robust environmental and social risk management (ESRM) frameworks are posited as tools that can, if effectively implemented, contribute to more sustainable and inclusive development. Yet beyond the ESRM challenges that have emerged from previous booms, the ongoing critical mineral boom is associated with distinct geographies, rapid speed of expansion and, in some cases, newly-commercialized extraction techniques. While many environmental and social issues remain constant, these evolutions necessitate refocused attention on ESRM governance in different contexts.

Financing institutions play an important role in influencing the development outcomes associated with mining. The pro-cyclical nature of commercial investment may lead to boom-and-bust cycles that pose risks to local communities without consistent environmental and social protections and leave behind legacies of socio-ecological harm. To avoid repetition of past mining cycles’ problems, public development finance institutions (PDFIs) and export credit agencies (ECAs) bring lower average interest rates, longer repayment periods and in-house ESRM policies. 

In a new journal article in Resources, Conservation and Recycling, Rebecca Ray, Bowen Gu, Julia Radomski and Cynthia Sanborn explore the avenues by which PDFIs and ECAs can support sustainability and inclusion through patient capital. Based on a systematic review of PDFI and ECA reports, interviews and an expert workshop, they find that PDFIs and ECAs affect critical minerals supply chains through three pathways: 1) direct financial support for extraction projects; 2) policy support for capacity building at government agencies tasked with mineral extraction ESRM; and 3) the development of long-term country strategies for engaging with energy transitions.

The authors highlight multiple gaps in the ESRM preparedness of PDFIs and ECAs in supporting the governance of sustainable and inclusive mineral supply chains:

• The PDFIs with the most extensive history of directly supporting critical mineral extraction, the China Development Bank and the Export-Import Bank of China, have significant space for strengthening ESRM frameworks, although the ongoing implementation of China’s 2022 Green Finance Guidelines may boost these policies.
• Interviews reveal that PDFI and ECA staff face challenges in applying ESRM to critical mineral supply chains, particularly without reliable minerals traceability.
• Among PDFIs that provide policy support for minerals sectors, the concentration in low-income countries almost completely excludes critical mineral-exporting countries.
• Regarding long-term strategies, Just Energy Transition Partnerships currently omit ESRM governance, and only a few World Bank Country Climate and Development Reports address them meaningfully.

Based on these findings, the study identifies the following areas for policy action over the coming years.

Policy recommendations:

• China’s National Financial Regulatory Administration is encouraged to publish transparent and verifiable key performance indicators for the Green Finance Guidelines.
• The US International Development Finance Corporation, which faces reauthorization in 2025, should be reauthorized while reaffirming its dedication to robust ESRM.
• The International Finance Corporation Performance Standards, adopted in large part by other PDFIs and ECAs, will come under review in 2025. The review should resist pressure to relax protections to expedite project approval; this will benefit not only the International Finance Corporation but other PDFIs and ECAs who use International Finance Corporation Performance Standards.
• Multilateral PDFIs should support emerging minerals traceability initiatives, as these must be international to be effective.
• As the World Bank evolution roadmap envisions expanding concessional finance to middle-income countries, it could take the opportunity to extend policy support to critical mineral exporters.
• ESRM goals should be reflected in long-term strategy platforms like Just Energy Transition Partnerships and World Bank Country Climate and Development Reports.

This mapping of PDFI and ECA activities concludes that patient capital can play a vital role in establishing sustainable and inclusive supply chains for the world’s energy transition by advancing ESRM. By seizing this opportunity, PDFIs and ECAs can ensure that the ongoing critical mineral boom learns the lessons from past commodity booms. The policy opportunities outlined above envision a pathway away from repeating the “resource curse.” In doing so, these institutions not only shape the trajectory of critical mineral governance, but also global standards for sustainable and inclusive development in the context of a just energy transition.

This journal article is based on a March 2025 report titled, ‘Unmined Potential? Opportunities for Development Finance to Support Sustainability and Inclusion in Transition Mineral Supply Chains.’