CASE STUDY
Eco Invest
CATEGORY
Liquidity
Capital market tool
Blended Finance; FX Hedging
Geography
Brazil
LISTING EXCHANGE
N/A
SECTOR
Financial Services
DFI / DONOR INTERVENTION
IDB
TRANSACTION SIZE
BRL 140.8 billion (3.2x implied aggregate leverage on BRL 44.1 billion of catalytic capital)
TRANSACTION YEAR
2024–2025
Structure and Capital Market Tool
Eco Invest Brasil operates through four complementary financial sublines designed to address specific binding constraints, while allocating catalytic capital through competitive auctions under strong governance arrangements that encourage broad participation from financial institutions and investors.
The four financial sublines of instruments are blended finance, FX hedging, FX liquidity and project structuring. Each is designed to address different market frictions, such as cost of capital, FX risk premium, short-term FX volatility and fragmented pipeline.
The partnership with IDB includes technical and institutional support since the programme's conceptualisation. It also includes a facility with the Central Bank of Brazil (BCB) called the IDB-BCB FX Hedging Conduit, which aims to increase the supply of long-dated FX derivatives under improved conditions for the local market. By using its AAA-rated balance sheet, market access, and multilateral counterparty standing, IDB can help reduce the cost of deferring option premiums and improve the feasibility of longer-tenor FX protection. The structure uses mirrored contracts to channel long-term derivatives through local financial institutions, so that neither IDB nor the BCB adds net FX risk to its balance sheet. Without affordable FX hedging, international demand for local currency instruments is systematically suppressed regardless of the quality of the underlying assets. By addressing this at the intermediary level, the programme strengthens the infrastructure through which public market liquidity could eventually flow.
Background and Market Context
Foreign exchange (FX) risk is one of the most persistent structural barriers to private investment in emerging markets. Green and infrastructure projects in particular face a fundamental cash flow mismatch. They raise capital in hard currencies (US dollars or euros) but generate revenues in local currency. When the local currency depreciates, financing costs rise sharply in real terms, threatening project viability and deterring long-term investors from committing capital in the first place.
Eco Invest is underpinned by strong public commitment, governance and international partnership. The Government of Brazil announced it at COP28 in December 2023 and formally launched it in 2024, in partnership with the Inter-American Development Bank (IDB) and the United Kingdom. The programme is housed within Brazil's National Treasury and deploys concessional public resources from Fundo Clima through competitive auctions to local financial institutions to scale private capital mobilisation for strategic investments aligned with Brazil's Ecological Transformation Plan.
Development Impact
Eco Invest addresses a barrier upstream of any individual transaction. By making FX hedging accessible to Brazilian banks, it removes a constraint that suppresses international demand for local currency instruments. Local borrowers can raise long-term finance without taking on hard-currency liabilities against local-currency revenues, while international investors gain a route into Brazilian assets with manageable FX risk. Housing the programme within Fundo Clima embeds this capability in Brazil's existing climate finance architecture, offering a replicable model for economies where the absence of hedging markets, not of viable projects, is the binding constraint on private capital.
Eco Invest has demonstrated its capacity to mobilise private capital at scale. Across its first four auctions, Eco Invest pre-allocated approximately BRL 44.1 billion in catalytic capital to support total investment of approximately BRL 140.8 billion, implying aggregate leverage of about 3.2 times. The third auction expanded the programme into equity mobilisation, directing resources to support start-ups and small and medium-sized enterprises.
Looking ahead, Eco Invest is being extended through FX EDGE, an IDB platform developed with Brazil and the United Kingdom to support other emerging markets and developing economies. FX EDGE combines tailored blended-finance and project-preparation facilities, FX liquidity instruments, long-term hedging solutions, and enabling reforms. By adapting these tools to country-specific priorities and institutional conditions, the platform aims to expand private capital mobilisation, deepen local markets, and reduce foreign exchange barriers to sustainable investment.