The blizzard of announcements and events from COP26 can be challenging to parse. Below are 5 emerging themes from the conference and some ideas on where to go next.

1. Which quantity matters

For too long, the world has focused on mobilizing the “100 billion,” a goal made at COP15 in Copenhagen for developed economies to mobilize USD 100 billion annually in developing economies by 2020. This is, of course, an important signal, and according to the OECD we haven’t reached it, which is a big problem for a core tenet of any negotiation: trust. But for the climate? The biggest problem is that we need to mobilize trillions, not billions. According to CPI’s most recent analysis, we’re only at 632 billion. For this, we can’t rely on incremental progress: we need a step change.

2. So does quality

The step change needed means focusing on quality in addition to quantity, which rightfully received much attention in many dialogues at COP26. This quality conversation quickly turns to deployment details, but that’s where we should be. How do we reduce fragmentation of international resources? How do we invest in systems change? The most exciting climate finance initiative announced at COP26 was therefore a group of donors working together with South Africa to fund $8.5 billion for an accelerated, just transition out of coal.

3. Ambitious announcements are a necessary precursor to action

Of the many announcements, one that stood out for its sheer magnitude was that of the Global Finance Alliance for Net Zero (GFANZ), which announced over USD 130 trillion of private capital committed to net zero. These commitments represent an important milestone – CEOs perceive there to be higher risk of sitting this out than joining in. This has not always been true.

However, despite public development banks investing USD 2.2 trillion globally annually, there was no similar statement of ambition to GFANZ. Some public development banks have already committed to Paris Alignment (the group of Multilateral Development Banks, the International Development Finance Club), but their efforts for COP26 appeared to be lost in technical details and individual, one-off initiatives. There were no collective timelines for Paris Alignment announced, no joint commitments on fossil fuel financing. The Finance in Common Summit has similarly struggled to produce ambitious consensus statements. Is it time for a High Ambition Coalition of DFIs?

4. Going forward, integrity in implementation is the name of the game

Like “quality,” the word “integrity” popped up in many conversations. In an official COP26 event on Driving Net Zero Finance Integrity, we hit three themes of integrity: credible targets, engagement, and investment for transition. We tackle many of these issues in CPI’s recently released Framework for Sustainable Finance Integrity, but a few common points emerged at COP.

On credible targets: 2050 is meaningless; what matters is what happens this decade. Any net zero goal without an interim, 2030-at-latest target in line with IPCC low- or no-overshoot pathways is not credible. Similarly, there has been much discussion about methodologies – how to calculate emissions, what scenarios to use, which sectors must be covered. There were some very welcome announcements, notably of the establishment of the International Sustainability Standards Board. However, these discussions and developments should not become shields behind which financial institutions do not act, forsaking the good for the unattainable perfect.

On engagement: portfolio emissions reductions only matter when they reflect reductions in the real economy, meaning that engagement with companies and with policymakers towards ambitious action—and holding financial institutions accountable on that—is crucial.

And finally, on investment for transition: business models to drive climate friendly investment in both developed and developing economies need to be tested and scaled up rapidly. For that, the public and private sectors need to reflect each others’ ambition.

Which brings me to my last point:

5. Just transition means investing in developing economies at scale

In a recent op-ed, Larry Fink of Blackrock argued for substantially more public subsidy to de-risk private investment in developing economies. While that is likely part of the solution, private investors also need to consider how they can independently deliver more investment in developing economies. One fundamental way to do this is through expanding their view of risk: if climate action is not implemented in developing economies, climate risk increases for everyone. Another way is through working a little harder to understand real risks versus perception.

That doesn’t let DFIs off the hook. Many international DFIs have made pledges to, for example, make 50% of their investments climate finance. Recently, a few have stepped up even further to say that 50% of their climate finance will address adaptation – it’s a welcome response to pressure. But what does that incentivize? For many international DFIs, it means they are looking for low risk, large projects and are looking to take “senior” positions in those – the projects and positions most ripe for private investment. To take additional risk, these international DFIs often compete for the same concessional funding that private investors and national and subnational DFIs are also trying to get, for example via the Green Climate Fund. DFIs—especially international ones—need to take more risk on their own balance sheets and serve a more catalytic role. And we need to measure them on private sector mobilization and other outcome-based metrics, not just on volumes of climate finance. Getting this right will take a concentrated reform agenda, led by their shareholders, to align their mandates and incentives with the future we want.

In conclusion

COP26 showed us that finance is a critical lever to drive change. It brought forth some truly ambitious commitments, and everyone involved should feel justifiably proud. But if we are to make good on these commitments, we need to act now, with integrity and with a focus on just transition.