Framing stranded assets in an age of disruption

The transition has attracted significant attention within the financial community, for good reasons: the asset base of entire industries will shift, and many of the most concerned industries are capital intense. But it is striking how much of the attention is directed towards financing the “new”. There are numerous reports and industry initiatives on “green finance”, i.e. how to most effectively scale the financing of new green technologies and markets. While this is certainly needed, it is also striking how much fewer research and industry initiatives there are on the “old” industries and assets, and what will happen to them.

This is a big problem: if there is one lesson to learn from economic history, it is that this type of massive transition will also mean massive stranded assets. Managing the stranded asset issue well will mean less unnecessary investment, fewer write-offs, less risk and fewer negative social consequences.

This report looks at which assets are at risk of becoming economically unusable due to the sustainability transition and broader disruption risks, and it develops a practical framework for the financial community to identify and quantify stranded asset risk. The authors hope is that the methodology will prove a useful decision-making tool for the financial industry.

The project was financed by Vinnova and delivered by Material Economics and the Stockholm Environment Institute, with support and expert input from SEB, Ratos and the Church of Sweden Asset Management. While all project participants contributed considerably, each participant might not agree with every conclusion in this report, and Material Economics carries the responsibility for any errors.