Launched in 2024 by the government of Brazil, with support from the Inter-American Development Bank (IDB) and the United Kingdom’s Foreign, Commonwealth & Development Office (FCDO), Eco Invest Brasil is a foreign capital mobilisation and currency hedging programme housed within Brazil’s national climate fund, Fundo Clima.
Eco Invest Brasil
Abstract
Accessing external funding for sustainable development frequently entails a risky trade-off for borrowers in emerging markets and developing economies: hard currency loans may have lower interest rates, but also expose projects to significant foreign exchange (FX) risk. Projects, particularly those in the green and infrastructure sectors, face severe cash flow mismatches when local currencies drop, endangering their financial sustainability. Brazil, despite having one of the largest and most liquid capital markets across middle-income countries, has long struggled with this FX issues.
Launched in 2024 by the government of Brazil, with support from the Inter-American Development Bank (IDB) and the United Kingdom’s Foreign, Commonwealth & Development Office (FCDO), Eco Invest Brasil is a foreign capital mobilisation and currency hedging programme housed within Brazil’s national climate fund, Fundo Clima. The programme aims to attract foreign capital, strengthen local capital markets, and reduce currency risk through four complementary credit lines:
Blended finance facility (Line A): Provides concessional capital in local currency (Brazilian real) to local financial institutions via competitive auctions. Bidders must demonstrate FX-hedged project pipelines and promise high mobilisation multipliers, thereby incentivising both risk reduction and private capital mobilisation.
FX liquidity facility (Line B): Inspired by historical precedents (e.g. the Overseas Private Investment Corporation’s facility for a Brazilian hydropower project), this line supports Brazilian firms with hard currency debt but real-based revenues by providing liquidity buffers in times of currency volatility.
Derivatives pipeline (Line C): Connects international capital markets to Brazilian financial institutions to help improve their access to long-term FX hedging instruments. The IDB leverages its International Swaps and Derivatives Association (ISDA) agreements to transfer cost-efficient derivative contracts to the Brazilian Central Bank, which will then intermediate these with local banks. A catalytic credit line also helps to support banks in offering hedging products to final beneficiaries.
Project structuring support (Line D): Aims to catalyse innovation and build a pipeline of sustainable projects, including through private equity and venture capital instruments.
For emerging markets and developing economies dealing with comparable obstacles to foreign capital investment, Eco Invest Brazil offers a replicable model. The programme’s innovative use of blended finance auctions, long-term derivatives, and catalytic credit lines directly help in addressing currency mismatches that constrain foreign investment. If successful, Line C’s derivatives operations could improve market data and lower hedging costs over time through accelerated price discovery. More broadly, Eco Invest Brasil exemplifies how coordinated action across development finance institutions, central banks, and local capital markets can deepen domestic financial systems, reduce risk, and mobilise climate finance at scale.
Presidency of Brazil (2024), Da garantia a operações de crédito no âmbito do Programa Acredita no Primeiro Passo, [Law 14.995/2024]
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