Yellen flags private capital’s role in climate-change battle

Treasury Secretary Janet Yellen.

Treasury Secretary Janet Yellen said private financing, and not just government spending, will be needed 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 US has rejoined – could run to $2.5tn over 10 years for the US alone, according to one estimate, Yellen said in a speech to a virtual conference Wednesday organised 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 US 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 US 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 galvanise finance in the endeavour. While many recent international climate-change discussions have focused on the role of multilateral development banks and formal climate-assistance programmes, 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 on 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 principle tool in attempting to minimise financial-sector risks associated with climate change, she said.“It’s FSOC’s job to understand these risks, to coordinate across US regulatory agencies in assessing the risks and, if necessary and appropriate, acting to mitigate risks to overall US financial stability,” she said in the Q&A.Yellen said US 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 US 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 $100bn annually to climate finance, but have fallen far short. As the world’s No 2 emitter of greenhouse-gas emissions, the US is under pressure to loosen its purse strings.