11 December 2018

The Currency Exchange Fund (TCX) has announced that the German Federal Ministry of Environment, Nature Conservation and Nuclear Safety (BMU) has invested EUR 50 million in TCX up to 2045. EUR 20 mln is a new investment and EUR 30 mln is an extension of 20 years of an existing investment into TCX, which is the proponent for the 2015 Lab instrument for the Long-Term FX Risk Management business model.

The new long-term capital will strengthen the capacity of TCX to provide medium to longterm currency hedges for loans and bonds which finance Sub Saharan Africa projects in energy efficiency, water, and grid- or off-grid renewable energy. Currently, these projects are primarily financed in hard currencies, such as the US dollar or Euro. However, they typically earn their revenues in local currencies. Hard currency financing thus renders the projects vulnerable to currency depreciations. Currency fluctuations have been a major risk and impediment for new investments in emerging and frontier markets as they can impose heavy costs and burdens on the local population and utilities.

The BMU investment will thus allow the fund to hedge climate investments of more than US$2 billion with significant knock-on effects to be expected. TCX CEO Ruurd Brouwer said “Again the German Government and the BMU show great leadership in scaling up an effective solution. TCX takes the currency risk off the shoulders of the poor and improves access to clean and affordable clean energy and transport.”

More information is available at: https://www.tcxfund.com/