U.S. Treasury Secretary Janet Yellen on Wednesday said the U.S. is backing the Climate Investment Funds’ (CIF) initiative to issue investment-grade bonds and raise new finance for clean energy in developing countries.

“I am pleased to join the U.K. in announcing that the U.S. intends to fully support the CIF Capital Markets Mechanism,” Yellen said in a finance day keynote at the United Nations Climate Change Conference (COP26). “Through an innovative leveraging structure, this initiative will help attract significant new private climate finance and provide $500 million per year for the CIF’s programming, including the … Accelerating Coal Transition investment program.”

The new mechanism, which is part of CIF’s Clean Technology Fund, could lead to $50 billion in investments over 10 years, CIF said. It represents what CIF says is the first time a multilateral climate fund will leverage its assets to issue bonds in the capital markets.

Multilateral development banks will disburse the bond proceeds as equity and debt, among other options, according to CIF.

Nine sovereign sponsors, including the U.S. and U.K., helped establish the $5.8 billion Clean Technology Fund in 2008.

“Consistent with CIF’s innovative mission, we’re trailblazing a capital mobilization model that is scalable, replicable and game-changing,” CEO Mafalda Duarte said in a statement.

Financing Net Zero

Speaking during a session later Wednesday on delivering finance for emerging markets, Yellen said she is the first U.S. treasury secretary to attend a Conference of the Parties.

“The reason I’m here is because climate change is not just an environmental issue,” she said. “It is not just an energy issue. It is an economic, development and market-destabilizing issue, and I would not be doing my job if I did not treat it with the seriousness warranted.”

Yellen’s presence at COP26 shows that the world is “in a point of inflection,” according to Uruguay Minister of Economy and Finance Azucena Arbeleche.

“I would say it’s a historical time for ministers of finance,” she said during a panel on supporting a financial system for a net-zero future. “Finance in general has a very important role to play if you really want to make progress.”

Arbeleche urged investors, financial institutions and sovereigns to align their incentives and objectives to help move from pledges to concrete actions.

Uruguay, she said, has set key performance indicators that are related to the climate pledges the country made in its Nationally Determined Contributions.

“We’re working specifically on the implementation of a financial instrument, a bond, where the cost of borrowing is related to this NDC goal,” she said.

Bonds or loans from the private sector must be linked to environmental indicators that are measurable, according to Arbeleche.

“If investors really are interested in the environment, then they should be willing to put their money into these kinds of financial instruments,” she said.

The clear and accelerated commitments from governments on net-zero targets is critical for investors, financial providers, shareholders, insurance companies and banks to make low-carbon investments with confidence, according to Alison Rose, CEO of British bank NatWest Group.

NatWest is a founding member of the Glasgow Financial Alliance for Net Zero, which said Wednesday that its financial sector participants’ commitments exceed $130 trillion.

“Very bluntly, the money is here, the money is committed, and the money is starting to mobilize,” Rose said during the panel discussion. “I think this is a very significant demonstration of the collaboration with so many different financial organizations, who so often are competing but are now working together and united behind a common goal.”

But despite an accelerated rally behind clean energy and net-zero goals, financing is not consistently flowing in that direction, according to Mathias Cormann, secretary-general of the Organization for Economic Co-operation and Development (OECD).

“Governments should be removing the distortions that divert investment away from the transition to net zero,” Cormann said. “Too many policies still encourage emissions-intensive investment, production and consumption.”

About 10% of COVID-19 recovery spending of OECD partner countries, for example, will have a “mixed or even negative impact on the environment,” he said.

To combat the problem, OECD recently announced that it will align development assistance with the Paris agreement.

For perspective, he said, development assistance from donor countries in 2020 reached US$161 billion.

“That is a sizeable amount of aid that, as of COP26, will now be fully aligned to the Paris objectives,” he said.