TCX’s mission is to hedge the currency and interest rate risks of investors and borrowers in illiquid emerging and frontier markets, thereby contributing to more sustainable development in those markets.
Due to its developmental mission and an investor base with a similar focus on sustainable development, the desire to encourage economic development in a sustainable manner is an important consideration in TCX’s Primary Investment decision-making process. Consequently, TCX strives to meet high environmental and social (E&S) standards when fulfilling its role. The objective of the E&S policy is to ensure that TCX will only enter into Primary Investments that support sustainable business practices. This policy objective furthermore seeks to protect the reputation of TCX and – through their involvement with TCX – that of its investors.
This policy is tailored to the indirect nature of TCX’s business: there is no E&S risk in the derivatives themselves, only in the underlying business activities supported with the hedge. TCX provides hedging services to DFIs, MIVs commercial banks, or non-bank financial institutions for the purpose of hedging the funding they provide to the emerging market borrower (Primary Investments), in which case TCX has no relation with the end-client that should adhere to the E&S standards. Our counterparty is the one that assesses the end-client and requires certain E&S standards from it. As such, TCX’s policy only applies to Primary Investments and focuses on assessing whether our counterparties have appropriate E&S management systems in place. TCX may also enter into a hedging relationship with an emerging market end-borrower directly, in which case there is a direct relationship with the end-client who is exposed to potential E&S risks. This is highlighted separately in the policy.
Please consult our E&S Guidelines here.