Treasury Secretary Janet Yellen said private financing, and not just government spending, will be needed to tackle the “existential threat” of climate change.
The overall cost of achieving net-zero carbon emissions by 2050 — in line with the 2015 Paris Agreement that the U.S. has rejoined — could run to $2.5 trillion over 10 years for the U.S. alone, according to one estimate, Yellen said in a speech to a virtual conference Wednesday organized by the Institute of International Finance.
“It’s going to be tremendously important for the financial services industry to marshal and allocate capital that’s needed to make the transition toward net-zero” emissions, she said in a question-and-answer segment that followed the speech. “Massive investments are likely to be needed and the bulk has to be private.”
The Treasury chief also highlighted the need to strengthen financial risk disclosures — making them more reliable, consistent and comparable across markets and countries — so investors can accurately gauge risks and opportunities.
Yellen pledged that the U.S. will help developing countries that are especially vulnerable to threats from climate change, but stopped short of making any specific financial promises on that front.
The infrastructure-focused economic proposal that President Joe Biden unveiled last month, including money to address climate change, “will be the most significant public investment in America since the 1960s, dramatically reducing U.S. emissions by greening the electricity and transportation sectors,” Yellen said.
Yellen’s comments come as Biden convenes the leaders of 40 nations, corporate executives and union leaders in a two-day virtual summit on the climate change, with a focus on how to galvanize finance in the endeavor.
While many recent international climate-change discussions have focused on the role of multilateral development banks and formal climate-assistance programs, the conversation at the summit will include a more expansive look at the role of private funds in propelling clean energy and building resilience, administration officials said Wednesday.
Yellen said the Treasury is involved in a number of initiatives aimed at removing hurdles, including efforts to improve financial reporting and increasing the reliability of climate-related disclosures.
The Financial Stability Oversight Council, a multi-agency body of regulators chaired by Yellen, will be the Treasury’s principal tool in attempting to minimize financial-sector risks associated with climate change, she said.
“It’s FSOC’s job to understand these risks, to coordinate across U.S. regulatory agencies in assessing the risks and, if necessary and appropriate, acting to mitigate risks to overall U.S. financial stability,” she said in the QA.
Yellen said U.S. officials will also work with the multilateral Financial Stability Board and other international bodies to make reporting requirements consistent and comparable across borders. She endorsed a “solid framework” for climate-related disclosures from an FSB task force chaired by Michael R. Bloomberg, founder and majority owner of Bloomberg News parent Bloomberg LP.
Yellen didn’t offer any specific new pledge of additional U.S. government funding to help developing nations adapt to a warming planet or build clean-energy projects.
Rich countries promised in 2009 that by 2020 they’d collectively devote $100 billion annually to climate finance, but have fallen far short. As the world’s No. 2 emitter of greenhouse-gas emissions, the U.S. is under pressure to loosen its purse strings.