FX Hedging Facility

The FX Hedging Facility is a customizable currency hedging product designed to lower costs for foreign investors in India's renewable energy sector by targeting 'tail risk' (extreme currency depreciation). Compared to commercial cross-currency swaps, the facility aims to eliminate counterparty credit and liquidity risks and provide a more efficient use of public grants. In a sample transaction, the facility could reduce hedging costs by approximately 30% and mobilize at least $9 of foreign investment per dollar of donor grant, with a greater than 50% probability of recovering the donor grant. The facility is currently in an advanced conceptual phase, with interest from a commercial bank as a guarantor and potential users such as Hudson Clean Energy Partners, who are interested in investing USD 500 million in utility-scale renewable energy projects.

• India requires approximately USD 189 billion in investment between 2016 and 2022 to reach its target of 175 GW of installed renewable energy capacity, a goal that is difficult to achieve through domestic investment alone.
• The FX Hedging Facility reduces currency hedging costs by targeting 'tail risk'—extreme currency depreciation—rather than subsidizing overall currency risk, which is a more efficient use of public grants.
• In a sample transaction where the user covers depreciation up to 4.5% per year, the FX Hedging Facility can reduce hedging costs by about 30% and achieve a leverage factor of 9 (mobilizing ~$9 of foreign investment per dollar of donor grant), with a >50% probability that the grant will be recovered.
• The facility is in an advanced conceptual phase with a defined pricing and structure; it has attracted interest from a commercial bank guarantor and potential users, including Hudson Clean Energy Partners for a potential USD 500 million investment in utility-scale renewable energy.

APA

Climate Policy Initiative (n.d.). FX Hedging Facility. https://www.climatepolicyinitiative.org/wp-content/uploads/2016/12/FX-Hedging-Facility_overview.pdf

Chicago

Climate Policy Initiative. FX Hedging Facility. n.d. https://www.climatepolicyinitiative.org/wp-content/uploads/2016/12/FX-Hedging-Facility_overview.pdf.

Wikipedia

{{cite report |author=Climate Policy Initiative |title=FX Hedging Facility |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2016/12/FX-Hedging-Facility_overview.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{climatepolicyinitiativendhedging, author = {{Climate Policy Initiative}}, title = {{FX Hedging Facility}}, institution = {Climate Policy Initiative}, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2016/12/FX-Hedging-Facility_overview.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }