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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

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

Relevant Actors & Audiences

Private FIs

TCX

Public FIs

NDBs, Swedish International Development Cooperation Agency

Multilateral Development Banks

Inter-American Development Bank (IDB), International Finance Corporation (IFC)

Governments

Ministries of Finance

Leading Countries and Alliances

Brazil

Milestones

The below events contain milestones related to De-Risking Private Investment (in terms of FX).

April

April 21-26 2025Washington DC, US

WBG/IMF Spring Meetings 2025

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Milestones

Mitigating Currency Risk

  • Make local currency (actual or synthetic) a default option for all MDB, public development banks and bilateral loans.

Mitigating Currency Risk

Make local currency (actual or synthetic) a default option for all MDBs, public development banks, and bilateral loans.

October

October 13-18 2025Washington DC, US

WBG/IMF Annual Meetings 2025

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Milestones

Mitigating Currency Risk

Progress update on FX platforms, including global pilots.

October 15-16 2025

G20 Finance Ministers and Central Bank Governors Meeting Oct 2025

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Milestones

Mitigating Currency Risk

G20 work on a coordinated approach to expanding FX risk mitigation tools, including MDB-backed hedging mechanisms.

November

November 10-21 2025Belém, Brazil

UNFCCC COP30

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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

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New Guarantee Platform Delivers Efficiency, Simplicity to Boost Impact

Private Finance, Mitigating Currency Risk

MDB guarantee platform

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