Market Roundup: Brazil’s plan to protect green investors from forex risks

President Luiz Inácio Lula da Silva issued a provisional decree laying the foundations for Eco Invest Brasil, a foreign exchange hedge program to protect investors in sustainable projects from the risk of currency fluctuations. 

State of play. The idea was first announced in February during a G20 meeting of finance ministers in São Paulo. According to the government, the program aims to minimize the risks associated with exchange rate volatility — especially in long-term investments of more than ten years — allowing for more foreign direct investment in Brazil.

Why it matters. Exchange risk is one of the main factors hindering investment in emerging markets such as Brazil, contributing to the current deficit in sustainable infrastructure and other large-scale green projects. 

How it will work. Just as car insurance covers losses in the event of an accident, this protection program guarantees that if the Brazilian real depreciates by a certain percentage, the investor will be protected. It will do this by ensuring the investor can buy U.S. dollars at a previously defined rate, thus minimizing losses.

• The Inter-American Development Bank (IDB) will act as an intermediary for the program, leveraging its AAA...