UNEP has taken the 1.5°C pathway out of service. Its Emissions Gap Report 2026, published on 21 October, concludes that the chance of holding warming to 1.5°C with no or limited overshoot has gone, and rebases the emissions gap against a lowest possible overshoot pathway: peak warming of 1.7 to 1.8°C around mid-century, with about a 50% chance of returning to 1.5°C by 2100. This coin toss is now the best case on offer.

Getting onto that pathway means cutting global emissions 18% by 2030 and 45% by 2035 against 2025 levels, an average of 5.7% a year. The new NDCs, covering 76% of global emissions, deliver 5 to 8% by 2030 and 11 to 15% by 2035. That leaves a gap of 16 GtCO2e in 2035. The pathway also needs about 320 GtCO2 of carbon removal this century, which no one yet knows how to deliver at scale. Every five years at current emissions adds roughly 0.1°C to peak warming.

Although there was some good news on the pace of renewable energy capacity build, none of that has yet turned fossil fuel supply down: coal, oil and gas supply is still rising, and UNEP expects oil and gas use to keep increasing this decade.

Current policies point to a 66% chance of temperatures rising to 2.8°C by 2100, and full delivery of all current NDCs only reduce that to 2.6°C. That NDC figure is worse than last year's because the United States withdrew from the Paris Agreement and historical emissions were revised. The new NDCs themselves had a near-zero effect on expected emissions and warming.

What this means for banks and private equity

Any climate scenario analysis for lending or investment portfolios that centres on a 1.5°C no-overshoot pathway (IPCC AR6 era and current NGFS) is now out of date. Updated scenarios have not yet been published. Our advice to clients is to consider overshoot scenario, a sharper and more disorderly transition, and a higher physical risk scenario.

Any bank or PE firm with targets described as 1.5°C-aligned needs to check what that now means. Compare the cuts implied in that target with those outlined in the UNEPs new best-case 1.5°C overshoot pathway.

Physical risk in mortgage and SME loan books and private equity funds becomes more material when even the best case peaks at 1.7 to 1.8°C, making adaptation finance more relevant. And heavier reliance on removals will put more scrutiny on how firms use and talk about carbon credits.

The UK's latest NDC sits at the ambitious end, yet there is still a policy gap. Current policies would leave UK emissions about 105 MtCO2e above its latest 2035 NDC of an 81% cut in emissions below 1990 levels. Closing that gap will require new government policy, most likely in buildings and transport, which creates transition risk for borrowers and portfolio companies as well as lending opportunities.

What to do now

Our advice ahead of COP31 in Antalya in November is to start preparing to model climate risk and transition targets bottom up. Like you would build a financial plan. The top-down targets set using (for example) SBTi tools lack the granularity to easily update now that 1.5°C with no or low overshoot is out of reach. More might come out of COP31 so there is little sense in rushing. In the meantime, check whether your public target language uses 1.5°C aligned. We have a Climate Target Assessment Framework and scenario analysis tools aligned to latest PRA expectations. Get in touch if it would help.