Yellen says $3 trillion is needed each year to fund climate transition

Treasury Secretary Janet Yellen said Saturday the world's transition to a low-carbon economy requires $3 trillion in new investment annually through 2050, and that filling the financing gap to reach that level of funding represents the biggest economic opportunity of the 21st century.

Yellen spoke in Belem, a Brazilian city known as the gateway to the Amazon, after meeting with G-20 finance ministers in Rio de Janeiro on Thursday and Friday. She said reaching net-zero carbon emissions goals remains a top priority for the Biden-Harris administration, but that doing so requires leadership from around the world.

"Neglecting to address climate change and the loss of nature and biodiversity is not just bad environmental policy. It is bad economic policy," Yellen said. "But being so close to the magnificent Amazon is also a reminder that the transition to a lower-carbon global economy is also the single greatest economic opportunity of the 21st century. The transition will require no less than $3 trillion in new capital from many sources each year between now and 2050."

Wealthy economies around the world provided a record-setting $116 billion in climate finance for developing countries in 2022, about 40% of which came from multilateral development banks (MDBs). Yellen said the banks, which include the World Bank and the Inter-American Development Bank (IDB), were setting new financing targets.

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She explained that the financing need is "the single-greatest economic opportunity of the 21st century," and can be harnessed in supporting sustainable, more inclusive growth – including for countries that are starved for investment.

In Belem, Yellen met with finance ministers from countries in the Amazon basin and IDB President Ilan Goldfajn. The treasury secretary reaffirmed the U.S. commitment to the IDB's Amazonia Forever program, which takes a holistic approach to sustainable development in the region by providing financing as well as project preparation and collaboration.

"We are hopeful that this program will incentivize greater private sector investment in the region that supports nature," she added.

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Yellen said the banks should also help spur new business models capable of mobilizing investment that supports nature and biodiversity, as well as strengthening economies and aiding the climate transition. 

Earlier on Saturday, Yellen launched a new initiative with Amazon basin countries including Brazil, Colombia, Ecuador, Guyana, Peru and Suriname to combat nature crimes – like illegal logging and harvesting of wildfire and minerals – that pose a threat to biodiversity and the Amazon ecosystem.

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"Nature crimes generate hundreds of billions of dollars of illicit revenue while harming local communities and threatening critical ecosystems," Yellen said. "These crimes fuel corruption and destabilization wherever they occur. By launching this initiative, we will help protect the integrity of the international financial system while also fighting back against a major threat to local economies and the environment."

Reuters contributed to this report.