**2. Historical and institutional evolution of development banks**

Development banks can be defined as legally-independent and governmentsupported banks carrying out financial activities on a professional basis within an explicit legal mandate to promote socioeconomic goals and public policy objectives (see, for example, definitions available in [2–5]).

They include both *multilateral development banks*, operating at a supranational level, and *national banks*, operating at a national and subnational level. Among the prominent multilateral development banks, we can identify the World Bank Group, the African Development Bank, the Asian Development Bank, the Asian Infrastructure Investment Bank, the European Bank for Reconstruction and Development, the European Investment Bank, the Inter-American Development Bank, and the Islamic Development Bank Group. Their presence in the international financial landscape is extensive and continues to grow.

Furthermore, the number of national development banks is estimated to surpass 400 [3], collectively holding assets exceeding \$5 trillion [6]. Notable examples include the China Development Bank, the Korean Development Bank, NAFIN (Mexico), BNDES (Brazil), KfW (Germany), AfD (France), and CDP (Italy). The significant presence of national development banks, spanning both emerging and advanced economies, underscores their growing relevance in the financial system. The European Union, for example, recognizes that the involvement of *national promotional banks* (a European synonym for national development banks) is necessary for the effective implementation of the European investment plans "due to their particular expertise and their knowledge of the local context, business, and investor communities as well as national policies and strategies" [4].

Development banks have played a significant historical role in facilitating economic growth, industrialization, urbanization, and development initiatives across nations. Mostly originating in the early nineteenth century as a response to the Industrial Revolution's demand for long-term capital, these banks initially emerged in Europe and North America to rectify market failures and foster infrastructure development. Supported or sponsored by governments, they played a vital part in financing pivotal infrastructure projects like railways and ports that were instrumental for industrial expansion. Moreover, following the Second World War, development banks played a significant role in post-war reconstruction efforts in numerous countries.

However, the majority of development banks existing today was established after the mid-twentieth century [3]. In this period, development banks assumed a more prominent role by actively supporting economic progress in developing nations during the wave of decolonization and the rise of newly independent states. These banks became crucial sources of financial resources for industrialization and infrastructure development, financing transformative ventures such as dams, power plants, and transportation networks that acted as catalysts for economic growth and modernization.

However, development banks maintain their importance in advanced economies, where they progressively adapted to tackle challenges arising from economic downturns and financial instability. Indeed, these banks have proven to be effective in playing a countercyclical role during periods of crisis, such as the Global Financial Crisis. Empirical evidence confirms the rising incidence of development banks on the total assets of the whole European banking system in the 2008–2009 recession period and during the 2011–2013 sovereign debt crisis [7]. In this period, they were increasingly tasked with providing crucial assistance to businesses facing limited access to liquidity and financing for investments. This role has further solidified in response to the recent global pandemic crisis [8].

Additionally, especially in developed countries, development banks have been increasingly tasked with addressing specific challenges related to inclusive and sustainable development. To this aim, their efforts increasingly align with the Sustainable Development Goals for 2030, including combating climate change and ensuring environmental sustainability with a focus on innovation in renewable energy sources and food security [2, 9–14]. CPI [15] indicates that climate finance constitutes a growing proportion of development banks' business activities, accounting for an average of nearly 30%. Development banks play a pivotal role in supporting high-risk ventures and act as catalysts for the much-needed financial resources to stimulate innovation, research and development, cutting-edge technologies, and vital societal initiatives such as climate finance [16–20].

Recently, development banks have undergone significant changes in terms of their interventions in the real economy. Many have made remarkable progress in supporting Small and Medium Enterprises (SMEs), resource efficiency, digital infrastructure, social housing, and education, highlighting their dynamic and transformative contributions to the economic landscape [7, 21, 22]. The importance of development banks and their ability to adjust their mission to meet evolving socio-economic needs can be better explained by studying the economic literature on public intervention in the economy. This literature provides insights into the economic reasons behind the existence of development banks, their potential shortcomings, and how they compare to other forms of public intervention in the economy. By examining this literature, we can gain a better understanding of the reasons why development banks can actively contribute to economic and social development.
