Yellen says private sector will need to fill the "gap" in the transition to a green economy
Treasury Secretary Janet Yellen said Wednesday the investment needed to transition to a green economy would be "enormous" and private financing would play a major role in its completion. While the American Jobs Plan promoted by President Joe Biden provides direct funds and tax credits toward the effort, meeting the total cost will require more.
Yellen referenced one estimate placing the needed investment in the United States alone at $2.5 trillion over 10 years.
"Private capital will need to fill most of that gap," Yellen said.
Yellen's remarks to the Institute of International Finance come ahead of the White House Climate Summit this Thursday and Friday, in which 40 nations are participating. She called climate change an existential threat to the economy and said reaching goals to tackle it would require "bold and urgent action."
On Monday, the Treasury Department also announced the launch of a Climate Hub to coordinate activities across the department and the first climate counselor, John Morton, who will report directly to and advise the secretary on climate change.
In her remarks Wednesday, Yellen praised the Biden administration's "whole-of-government" approach to tackling climate change and said her department's focus was on making it a "whole-of-economy" approach, including in the private sector.
"We recognize the importance of public sector investment, particularly in green infrastructure, to facilitate the transition to net-zero emissions," Yellen said. "The policy steps the Administration has proposed provide clarity on the path forward, helping households, businesses, and investors plan and invest. We also recognize the financial sector has an opportunity to play an important role in financing and leading the transition of the global economy to a net-zero economy."
Yellen also said while there is growing demand for climate-friendly investments such as green bonds and sustainable assets, more needs to be done on reporting standards for investors to be able to accurately assess climate-related risks and opportunities.
Yellen said it would be important to build on existing work to improve climate-related disclosures. Yellen noted the Securities and Exchange Commission is currently reviewing its guidance on climate-related risk disclosures and her department will work with the agency as it participates in international talks on the matter.
She also expressed supports for the International Financial Reporting Standards Foundation's effort to establish a Sustainability Standards Board which would build on climate disclosure standards. The nonprofit organization's standards are currently implemented in more than 140 countries.
