India's Green Projects Hit with 6-8% Currency Hedging Costs

Currency hedging is adding significant costs to green projects in India, deterring foreign investment and increasing annual financing costs by 6-8%.

The India Sustainability Taskforce report highlights that most green projects generate revenues in Indian rupees while international investors lend in hard currencies such as the US Dollar or Euro, creating a currency mismatch.

Rolling short-term hedges can add 6-8% to annual financing costs, making it difficult for individual project investors to absorb this risk.

To address this issue, the taskforce proposes a dedicated foreign exchange (FX) risk facility backed by public, multilateral or blended-finance capital.