Currency Hedging Adds Up to 8% to Green Project Financing Costs in India

A recent report from the India Sustainability Taskforce highlights the significant impact of currency hedging on green project financing costs in India.

The taskforce, a joint initiative between the Confederation of Indian Industry (CII) and IIM Ahmedabad, suggests that currency hedging could add 6-8% to the annual financing costs of green projects in India, making it more expensive for foreign capital to flow into the country.

This issue arises because most green projects in India generate revenues in Indian rupees, while international investors typically lend in hard currencies like the US dollar or euro. As a result, there is a currency mismatch that raises the effective cost of overseas financing.