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  3. Mitigating Currency Risk

Mitigating Currency Risk

Currency risk is an ongoing barrier to international climate finance flows, as projects need to create greater returns to cover the uncertainty of exchange rate shifts.

2030 Goals

01

Regular utilization of currency risk instruments that reduce the cost of hard to local currency conversion in EMDE lending

02

Greater development of low-cost currency risk instruments that speak to local currency needs

Status

No Progress

FX tools to mobilize private capital have become key, with Brazil launching its hedging instrument in 2024 and multiple proposals being discussed.

The ultimate impacts of these instruments on capital mobilization are still to be determined. Tools that include securitization are getting a lot of attention as a method to support local markets while increasing local currency loans

Leading Actors

Cooperation is required between these actors and audiences to drive progress foward in Mitigating Currency Risk.

Private FIs

TCX

Public FIs

Swedish International Development Cooperation Agency

Multilateral Development Banks

European Bank for Reconstruction and Development (EBRD)

Multilateral Development Banks

Inter-American Development Bank (IDB)

Multilateral Development Banks

International Finance Corporation (IFC)

Leading Countries

Brazil

Alliances

FiCS

Leading Countries

United Kingdom

Learn More

Publications and educational material to deepen understanding of Mitigating Currency Risk.

Brazil hedging instrument

Mitigating Currency Risk

The document explains Brazil’s Foreign Private Capital Mobilization and Currency Hedging Program, which aims to attract foreign investment by improving macroeconomic stability and predictability. It is designed to support Brazil’s ecological transformation.

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Global Financial Stability Report: Shifting Ground beneath the Calm

Mitigating Currency Risk

The report analyses risks in the global financial system, with a focus on FX markets and cross-border capital flows. It explains how foreign-currency debt, capital flow volatility, and liquidity stresses can increase exchange rate risks, and outlines policy measures such as stronger FX market oversight and development of local-currency markets, to enhance resilience against currency shocks.

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