The COP26 climate talks in Glasgow are finally over. After a fortnight of complex negotiations that nearly failed because of a disagreement over two words – ‘phase out’ – delegates left with an agreement.

But were the talks a success or failure? How closer is the world to limiting global temperature rises to within reach of 1.5°C above pre-industrial levels?

In an earlier article – Last Chance Saloon – we discussed six things that we wanted to see at COP26. This was a shopping list of what needs to be done to eventually achieve that elusive 1.5°C goal.

In this article, we go through the list again to compare it against what actually happened in Scotland earlier this month.

What we said: Countries should upgrade their emissions reduction targets so that total global emissions are compatible with a sub 2°C goal.

What happened: Announcements made during the conference have the potential to orientate us towards sub 2°C warming. The Glasgow Climate Pact explicitly anchors the goal at 1.5°C (the more ambitious of the 2015 Paris Agreement targets) and it was the first time that governments have pledged emissions targets that are sufficiently ambitious to hold global warming to under 2°C. Countries changed the ‘ratcheting mechanism’ to bring forward the date for revisiting 2030 targets (to 2022 from 2025). It was also encouraging to see China and the US, the biggest emitters, announce their intention to work closer on climate issues.

However, many of the pledges can be described as ‘plans for plans’. There are few details around how they will be achieved or financed. There’s also too much reliance on, as yet, undeveloped technology. The world needs action plans that will halve emissions by 2030 and not just vague longer-term ambitions. Even if all the pledges linked to COP26 are implemented in a timely fashion, the best case scenario sees global warming of 1.8°C. An analysis of credible commitments to reduce emissions between now and 2030 points to something closer to 2.4°C. Our climate scenario analysis embeds the assumption that the most likely pathway lies roughly in the middle of those two outcomes.

What we said: As many advanced economies as possible must commit to net-zero 2040 targets.

What happened: The advanced economies are still focused, where they do have net-zero targets, on 2050. And many of those targets still lack credibility. Unless you think emerging markets will completely decarbonise by 2050, then the rich nations must decarbonise faster to keep 1.5°C a realistic possibility. It's the only way to get the maths to add up.

This is also important to ensure a ‘just transition’, whereby rich countries transition faster to compensate for the likely, and justifiably slower, pace in poorer countries. For example, India was one of several countries that pushed for the dilution of commitments around coal to ‘phase down’ from ‘phase out’. However, India needs to fight poverty, as well as manage the transition to better sustainability. It has improved its emissions reduction targets (net-zero by 2070 and 50% renewable electricity by 2030) but also needs financial help to effect this change. Similarly, Indonesia has pledged to achieve net-zero by 2060, but this is conditional upon the provision of appropriate financial support.

The failure of the advanced economies to quicken their decarbonisation plans at COP26 is a key reason why we still think it is unlikely that the objectives of the Paris Agreement will be met.

What we said: Countries must back up their targets with concrete measures such as binding legislation, more onerous carbon pricing, joined up policy across all levels of government, and greater zero-carbon research spending.

What happened: We’ve seen ambitions outlined at a very high level, but we still need evidence that these ambitions are backed by legislation. While it’s too early to rule out a significant advance in this area, the current signs are that legislative change will not be sufficient. This is partly because the dynamics of domestic politics play a huge role in what is ultimately a global challenge.

Meanwhile, the courts will be important as they will be an increasingly powerful weapon against lack of action. Here the issue of ‘loss and damage’ – the climate change impact that can't be adapted to and where the losses are significant and often permanent – will lie at the heart of much of this future litigation. However, it’s important to recognise the limits of the legal route: most courts only have limited jurisdiction; courts in many countries aren’t politically independent; and courts may be influenced by cultural bias.

What we said: Higher carbon prices need to channel revenue into progressive policy initiatives, including reform of tax and transfer systems.

What happened: Carbon pricing is still woefully inadequate in nearly every economy. For example, there are carbon prices for only some 20% of global emissions and those prices, in most cases, are far too low. That’s why there's not a lot of revenue to be recycled into other climate initiatives. Even in the European Union – a climate leader – a lot of the revenue is used to compensate carbon emitters. That was part of the deal to get large emitters to sign up to the programme. But it means there’s less left for funding other initiatives.

We hope this will change. By the time the ratcheting mechanism reviews Nationally Determined Contributions – country targets for mitigating greenhouse gas emissions – next year, we will be looking for meaningful legislative change. This includes efforts to make carbon pricing more aligned with the latest pledges.

What we said: Countries need to treble the size of the Green Climate Fund and to accelerate the sustainable development mechanism to aid the ‘just transition’.

What happened: Rich countries failed to provide substantially more financial support to developing countries to help them transition and adapt to climate change. Some US$100 billion a year has been pledged for this purpose and we expect the first instalment to be distributed by 2023. Japan has promised additional funds and there was a separate financial commitment to assist in climate adaptation specifically. However, adaptation costs in poor countries are estimated to be some five to 10 times what’s available. This gap will only widen as the physical impact of climate change gets worse.

The developed world has a number of reasons to help: developing countries are least responsible for the climate problem but have to devote a huge share of their budgets to cope with the damage; many developing countries don’t have viable energy alternatives – at least not yet; decarbonisation is more difficult for a rapidly growing economy because the reduction in carbon intensity each year has to be larger when you're growing fast. Therefore developed markets need to do more. They need to review how they can step up and bring net zero forward, phase out fossil fuel subsidies and deliver on climate finance pledges. Only then will emerging markets be able to do their bit.

What we said: The financial industry needs to implement clear climate disclosure frameworks and standards in line with Task Force on Climate-related Financial Disclosures (TCFD) recommendations.

What happened: The financial industry was very high profile at COP26 and the UK led the way by saying it will establish the world’s first net-zero aligned financial centre. The Glasgow Financial Alliance for Net Zero (GFANZ) announced that 450 GFANZ members (including abrdn) managing some US$130 trillion of private sector assets are ready to deploy their capital to support net zero. This equates to some 40% of global financial assets.

Nevertheless, we need to be very careful about taking this number at face value because it represents the total assets of GFANZ members, rather than those assets that are net-zero aligned. Most members are clear that their ability to align their own financing with 1.5°C, or even below 2°C, objectives is reliant upon global policy paving the way.

That said, all members have committed to engage with clients to develop solutions that align with net zero and to help develop industry best practice. To support consistent disclosure, the International Sustainability Standards Board (ISSB) was created to deliver a comprehensive baseline for global sustainability disclosure standards. Most investors recognise the importance of energy-transition and decarbonisation trends in the world. Many of them are using climate scenario analysis to identify the investment risks and opportunities.

So was it a cop out?

COP26 sent a strong signal that there are positive changes taking place across public and private sectors. However, the pace isn’t fast enough to limit warming to 1.5°C, or even well below 2°C.

The event anchored 1.5°C as the global climate target with commitments made around deforestation, methane and the Glasgow Breakthroughs agenda, which focuses on provision of clean technologies.

For the first time, there was also a specific reference to ‘phasing down’ coal and inefficient fossil fuel subsidies – despite the wording being softened at the last minute to the disappointment of many stakeholders.

The change to the ratcheting mechanism emphasises the urgency of the climate problem, limits the potential for further feet dragging and elevates the importance of COP27.

But most of the changes we considered necessary didn’t materialise (although that didn’t come as much of a surprise).

The failure to deliver the changes needed for Paris-alignment doesn’t alter the likelihood of the zero-carbon energy transition progressing. But it does suggest that the pace will likely remain moderate which, in turn, will influence the scope of investment risks and opportunities

COP26’s success or failure will only become apparent once we can see how many countries put promises into credible, legally-binding action to rapidly reverse the current trend of rising emissions. Until then, the goals of the Paris Agreement remain on life support.