Nature Climate Change · 2022 · 274 citations · 33 references
BusinessEconomicsResource EconomicsCorporate FinanceEnvironmental EconomicsFinancial EconomicsAsset ManagementClimate FinanceClimate Risk ManagementEnergy Transition RiskFinancial RiskMarket RiskAsset Stranding RiskFossil Fuel Stranded Asset RiskFossil Fuel Transition EquityMarket Risk Under Climate TransitionRisk OwnershipStranded Assets
The distribution of ownership of transition risk associated with stranded fossil‑fuel assets remains poorly understood. The authors calculate that global stranded assets in the upstream oil and gas sector exceed US$1 trillion in present value under plausible climate‑policy scenarios. They trace equity‑risk ownership from 43,439 oil and gas production assets through a global network of 1.8 million companies to their ultimate owners. The study finds that most of the stranded‑asset risk falls on private investors in OECD countries—especially through pension funds and financial markets—representing an international net transfer of over 15 % of global stranded asset risk to these investors, underscoring their major stake in the transition.
Abstract The distribution of ownership of transition risk associated with stranded fossil-fuel assets remains poorly understood. We calculate that global stranded assets as present value of future lost profits in the upstream oil and gas sector exceed US$1 trillion under plausible changes in expectations about the effects of climate policy. We trace the equity risk ownership from 43,439 oil and gas production assets through a global equity network of 1.8 million companies to their ultimate owners. Most of the market risk falls on private investors, overwhelmingly in OECD countries, including substantial exposure through pension funds and financial markets. The ownership distribution reveals an international net transfer of more than 15% of global stranded asset risk to OECD-based investors. Rich country stakeholders therefore have a major stake in how the transition in oil and gas production is managed, as ongoing supporters of the fossil-fuel economy and potentially exposed owners of stranded assets.
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