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
- Regular utilization of currency risk instruments that reduce the cost of hard to local currency conversion in EMDE lending
- Greater development of low-cost currency risk instruments that speak to local currency needs
StatusNo progress
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
Private FIs
TCX
Public FIs
Swedish International Development Cooperation Agency
Multilateral Development Banks
European Bank for Reconstruction and Development (EBRD), Inter-American Development Bank (IDB), International Finance Corporation (IFC)
Leading Countries
Brazil
Alliances
FiCS
Milestones
The below events contain milestones related to De-Risking Private Investment (in terms of FX).
November
UNFCCC COP30
Milestones
Mitigating Currency Risk
Launch of expanded FX risk-mitigation initiatives, with commitments from MDBs and DFIs to provide support.
Resources
The below resources all pertain to the topic of De-Risking Private Investment (in terms of FX).
Brazil hedging instrument
Private Finance, Mitigating Currency Risk
New Guarantee Platform Delivers Efficiency, Simplicity to Boost Impact
Private Finance, Mitigating Currency Risk
MDB guarantee platform