A23a. A few weeks ago, the world learned that A23a, the largest iceberg in the world, had broken away from the pack ice and was moving towards the far north of the Antarctic Peninsula.


According to scientists from the British Antarctic Survey, the cause of the iceberg’s detachment is due to its constant shrinkage since 1986, which made its detachment inevitable. If it washes ashore in South Georgia, it could cause problems for the millions of seals, penguins and other seabirds that breed on the island. A23a’s large mass could disrupt the animals’ normal feeding routes, preventing them from properly feeding their young.


COP 28: Historic Transition Agreement Signals Fossil-Free Future

More recently, the closing of COP 28 in the United Arab Emirates was met with applause and an agreement was reached at the end of the night, approved by the 195 countries present. A compromise which for the first time evokes not an exit but a transition away from fossil fuels.

COP 28, between hopes and limits: an agreement at the end of suspense after a final night of debates. The president of COP 28 in Dubai salutes a moment in history: “We must be proud of our historic success (…) The world needed to find a new path”.

For the first time, an agreement reached at the end of the COP evokes a transition towards the end of gas, oil and coal without setting precise dates for the exit from fossil fuels. A compromise where every word counts, which is not binding on the signatory countries, but still a step forward for the climate.

The oil wells will continue operating for now. However, this announcement sends a strong message to the market and investors. It indicates that the future of energy will not depend on coal, oil, and gas. Instead, the focus will be on clean energy sources without fossil fuels.

These fuels are the primary contributors to greenhouse gas emissions. The goal is to reduce global warming and transition to a decarbonized future. Instead, it will be focused on clean energy without fossil fuels, which are the main cause of greenhouse gas emissions. This is to help limit global warming and create a decarbonized future.


Navigating Financial Waters: Ice Melt’s Ripple Effects

On the other side of the chessboard, financial institutions and their captains. While the link between melting ice and a financial institution management committee may seem enigmatic, there are potential connections linked to environmental, economic and social issues:


  • Investments and financing

Financial institutions are often involved in financing projects, including those related to the exploitation of natural resources and energy. If ice melt is linked to climate change, activities financed by financial institutions could be indirectly implicated in these issues.


  • Financial Risks

Melting ice can cause significant financial risks for many industries. For example, businesses that rely on the exploitation of natural resources in polar regions may be affected. Financial institutions, as lenders and investors, may be exposed to these risks.


  • Corporate Social Responsibility (CSR)

Increasing pressures for companies, including financial institutions, to adopt sustainable business practices may lead managers to take actions related to reducing their impact on the environment. The melting of the ice could be a pressure factor in this context.


  • Green investment opportunities

The transition to a greener economy can create investment opportunities in sectors such as renewable energy, clean technology and energy efficiency. Financial institutions can play a role in financing these initiatives.


  • Company Reputation

Leaders of financial institutions must be aware that their companies’ actions impact its reputation. Being perceived as contributing positively or negatively to environmental issues can influence the company’s image and its relationship with customers, investors and other stakeholders.


In summary, although the direct link between melting ice and financial institution leaders is not obvious, there are interconnections across economic activities, financial risks, social responsibilities and investment opportunities that can influence the decisions made by the managers of a financial institution.


Navigating Climate Risks in Financial Institutions

We can therefore ask ourselves the question of the future of financial institutions with regard to climate risk to the extent that their managers act responsibly. The future of financial institutions will be closely linked to climate risk management. Climate change poses a significant threat to financial stability and the operations of financial sector institutions.

Here are some potential trends and developments related to climate risk for financial institutions in the future:


  • Climate risk analysis: Financial institutions will need to step up their efforts to assess and integrate climate risks into their decision-making processes. This includes the assessment of physical risks (such as natural disasters) and transition risks (related to the transition to a decarbonized economy).


  • Disclosure standards: There is a growing trend toward transparency around climate risks. Many regulators and international organizations are encouraging financial institutions to disclose their climate risk exposures. Standards such as the Task Force on Climate-related Financial Disclosures (TCFD) are gaining importance.


  • Sustainable financing: Financial institutions will be increasingly called upon to support sustainable projects and businesses. Green loans, green bonds and other sustainability-related financial instruments are growing in popularity, providing investment opportunities in low environmental impact initiatives.


  • Regulatory pressures: Financial regulators will impose stricter requirements on climate risk management. Some countries have already started to incorporate these considerations into their regulatory frameworks, and this may become more prevalent globally.


  • Financial innovation: Financial institutions can play a key role in developing innovative financial products to help mitigate climate risks. This includes insurance mechanisms, hedging instruments and other financial solutions adapted to the climate context.


  • Engagement with stakeholders: Financial institutions will need to strengthen their engagement with all stakeholders, including shareholders, customers and regulators, to demonstrate their commitment to sustainability and responsible management of climate risks.


  • Training and skills: Finance professionals will need to develop new skills to assess and manage climate risks. Training and skills building in this area will become essential.


In summary, the future of financial institutions facing climate risks is likely characterized by increased integration of these risks into business practices, increased transparency, sustainable investment opportunities and adaptation to new regulatory and environmental realities.


Adaptation: Key Response for Institutions

In conclusion, if we had to find a common word for “climate risk” and “financial institutions” it would be “adaptation”: Financial institutions are increasingly called upon to adapt their strategies and practices to face the risks linked to climate change. Adaptation involves taking steps to minimize potential negative impacts and capitalize on emerging opportunities linked to climate change, while maintaining financial stability.


An Article by Olivier Devuyst – Consultant at DynaFin.