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 today in Nature Food. The transition to healthier and more sustainable food systems could leave significant financial assets stranded, creating barriers to urgently needed changes.
Specifically, the meatpacking sector alone faces a potential $217 billion in stranded assets, a magnitude comparable to asset stranding in fossil fuel sectors necessary for climate targets. A notable new driver of asset stranding is the growing use of obesity-treatment drugs such as Ozempic and Wegovy, which could significantly reduce calorific intake and demand for ultra-processed foods.
The research underscores that the risk of stranded assets is not only a financial issue but also a major impediment to rapid food systems transformation. The authors argue for proactive strategies by firms, investors, and policymakers to efficiently and equitably manage the transition.
Stephanie Walton, lead author and DPhil student at the Oxford Sustainable Finance Group, Smith School of Enterprise and the Environment, says: “Companies are trapped in a vicious cycle, under pressure to reward shareholders, making it increasingly challenging to retire assets incompatible with sustainable and healthy food systems. Proactively managing the costs of asset stranding is essential to unlock policy progress and drive necessary transformations in the food sector.”
“We can’t just click our fingers and turn the world sustainable. People will lose out. Financially. And in a big way. Identifying who is the first step towards identifying where the resistance to change is coming from,” says Zia Mehrabi, Director of the Better Planet Laboratory, University of Colorado, Boulder.
Jessica Fanzo, Director of the Columbia Climate School, says “Understanding stranded assets may be the missing piece in the food policy puzzle - researchers can help reveal where change is blocked and how to break through towards food system transformation.”
The authors suggest several ways of navigating the issue of stranded assets in the food industry, including galvanising political and public support to overcome industry obstructionism, implementing policy shifts that allow firms time to adjust, applying "grandfathering" exemptions for existing firms, and providing direct compensation to owners of stranded assets. These strategies have seen varying degrees of success, such as the implementation of sugar taxes in Mexico and the UK.
This research builds on previous work by the University of Oxford in 2013, which first outlined the concept of stranded assets in agriculture and its associated financial risks.