Treasury Secretary Janet Yellen called for a "wholesale transformation" ofcarbon intensive economiesat the UN Climate Change Conference (COP26) in Glasgow on Wednesday, urging the private sector to capitalize on an opportunity to help developing nations transition to a carbon free economy.
"Rising to this challenge will require the wholesale transformation of our carbon-intensive economies," Yellen stated in prepared remarks. "It’s a global transition for which we have an estimated price tag: some have put the global figure between $100 and $150 trillion over the next three decades. At the same time, addressing climate change is the greatest economic opportunity of our time."
Yellen specifically pledged U.S. support for Climate Investment Funds (CIF), a multilateral climate finance mechanism to help the poorest countries most affected by climate change, build out climate resilience, and shift to a future free of fossil fuels.
“Through an innovative leveraging structure, this initiative will help attract significant new private climate finance and provide $500 million per year for the Clean Technology Funds’ programming, including the new Accelerating Coal Transition investment Program,” Yellen stated.
Financing for developing countries have increasingly become a contentious point of larger climate discussions, with a $100 billion pledge by the world’s advanced economies yet to be paid out more than five years after it was initially promised.
Developing countries argue they are being unfairly tasked to pay for a climate crisis largely caused by emissions spewed by the world’s richest countries, while the poorest nations have been hit the hardest by extreme weather brought on by climate change.
On Tuesday, Special Presidential Envoy John Kerry admitted $100 billion would not be enough given that the climate crisis is intensifying and time is running out to cap global warming at 1.5 degrees Celsius, a goal climate scientists have said would avert a catastrophe.
“$100 billion doesn't do it, folks," Kerry said. "It's trillions of dollars that are needed. And the only way we will get this done is if trillions of dollars are forthcoming."
President Biden has already announced a U.S. commitment to quadruple international climate finance by 2024, to more than $11 billion. The private sector is expected to pick up the bulk of the investments, because of the sheer scale and cost of the effort needed to sunset coalpowered plants and invest in renewable energy, among other measures.
Yellen stated the private sector stands "ready to supply the financing" to avoid the worst of the climate crisis. Some of the world’s largest multinational companies, including Amazon (AMZN) and Microsoft (MSFT), as well as asset managers have made the trip to Glasgow to seek investment opportunities in the green transition.
However, commercial banks have been slow to line up capital for projects. While Citigroup (C), Morgan Stanley (MS), and Bank of America (BAC) have committed to shifting its investments to businesses that reduce carbon emissions, major banks from India, Japan, and Australia haven’t followed.
Yellen, who mentioned "investments that will be profitable in sustainable investments" to Congressional testimony last month, asserted in her COP26 remarks that "it is simply cost effective to go green."
The Financial Stability Oversight Council, chaired by Yellen,released a reportlast month laying out actions needed to build resilience in the financial system from the risk of climate change, including enhanced climate-related disclosures.
“CEOs representing trillions in assets are here to show their commitment," Yellen stated. "Financial institutions with collective assets under management of nearly $100 trillion have come together under The Glasgow Financial Alliance for Net Zero, or GFANZ. If these ambitions are realized, those portfolios will be carbon-neutral by 2050 and significantly reduce emissions by 2030."