Let’s Catalyze, Not Crowd Out. Canada Needs Infrastructure Banks to Unlock Private Capital

May 20, 2025 – Canadian policymakers need to strengthen the role of infrastructure banks to bridge the widening gap between infrastructure needs and private investment, according to a new report from the C.D. Howe Institute.

In “Breaking the Catch-22: How Infrastructure Banks Can Kickstart Private Investment and Overcome Market Failures,” Sebastien Betermier outlines how these institutions can help mobilize private capital by addressing the early-stage risks that often deter investment for critical projects like energy storage, offshore wind power, and digital transition.

“Canada needs new infrastructure – housing, energy, ports – it’s all critical to our future,” says Betermier. “But there’s a catch-22: developers can’t move forward without financing, and investors are wary of early-stage risk. As a result, major projects like clean energy, digital networks, and port facilities often stall before they even begin.”

The report draws on case studies and interviews with senior executives from six infrastructure banks across North America, Australia, the Nordic-Baltic region, and the UK. It demonstrates how these institutions can de-risk projects, coordinate complex supply chains, and offer flexible financing to make private participation viable.

“Infrastructure banks can break this deadlock by absorbing initial risk and using concessional loans to crowd in private investment,” Betermier explains.

While several challenges and obstacles remain, the report finds they are manageable with the right policies and strong government commitment to involving (rather than crowding out) the private sector. Early signs suggest infrastructure banks hold significant potential to catalyze private investment and deliver lasting public value.

“Infrastructure banks won’t solve every infrastructure challenge on their own,” Betermier says. “But with the right design and clear priorities, they can go a long way in drawing private capital into the kinds of projects Canada urgently needs – projects that won’t get off the ground otherwise.”

Read the Full Report

For more information, contact: Sebastien Betermier, Associate Professor of Finance, Desautels Faculty of Management, McGill University; Raquel Schneider, Communications Officer, C.D. Howe Institute, 416-479-9520 ext. 9520, rschneider@cdhowe.org.

The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. Widely considered to be Canada’s most influential think tank, the Institute is a trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review.

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