Stranded assets & transition finance
Overview
Since our inception we have conducted pioneering research on stranded assets and continue to undertake significant research on the topic.
Our work
A core part of this work is researching environment-related risks that can strand assets across different sectors, geographies, and asset classes; how such risks are emerging; how they might be interrelated or correlated; their materiality (in terms of scale, impact, timing, and likelihood); who will be affected; and what affected groups can do to pre-emptively manage these risks.
Growing from and related to this, is work on transition finance, which is the provision and use of financial products and services to support counterparties, such as companies, sovereigns, and individuals, realise alignment with environmental and social sustainability (Caldecott, 2020).
Counterparties successfully transitioning towards sustainability is one critically important way to avoid future stranded assets. We are exploring how counterparties can do this, the role of finance and financial services in enabling transitions, and the reforms needed in policy and regulation to support a more rapid transition.
Research topics include:
- Financial products and services to support the transition, including sustainability-linked instruments
- Implications of stranded assets on corporate strategy
- Reforming the financial system and the role of central banks and supervisors
- The future of different sectors particularly exposed to stranded assets
- Stewardship and engagement as a tool to support the transition, including engagement in asset classes beyond listed equities, measuring engagement performance, and place-based engagement
- Firm-level ESG performance and its relationship with macro-economic performance
- Changing risk preferences across the financial system as a result of the energy transition
Analysing performance of (un)sustainable investments in different asset classes using novel datasets
Our 2014 working paper 'Stranded assets and scenarios' sets out the concept of stranded assets.
Projects, programmes, and special initiatives
- Transition Plan Taskforce (TPT)
- Energy Transition Risk and the Cost of Capital Project (ETRC)
- Climate Stress Tests and Scenarios Project (CSTS)
- UK Centre for Greening Finance & Investment (CGFI)
Associates
- Dr Jacob Schumacher | Senior Research Associate
- Anthony Limburg | Research Assistant
- Ira Poensgen | Research Assistant
Select media coverage
FT: Lex in depth: the $900bn cost of 'stranded energy assets '
"If the 1.5C climate target were to be met, over 80 per cent of hydrocarbon assets would be worthless." Ben Caldecott comments in the FT Lex column on the Smith School-led concept of stranded assets.
New research highlights scale of potential stranded assets in the food sector
Investments in the food sector face substantial economic and financial risks due to potential asset stranding, according to a new perspective published in Nature Food.
Food brands and investors scramble to stave off risk of stranded assets
Ethical Corporation Magazine, a part of Thomson Reuters, explores rapidly growing concern over stranded assets (where investment assets become liabilities) for the agricultural industry.