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      The Environment Agency Team

      11b Lingfield Point
      DL1 1AX

Stranded assets

What is the issue of carbon stranded assets?

Stranded assets are those which suffer unanticipated or premature write-offs, downward valuations, or are converted to liabilities. The concept of fossil fuel or carbon stranded assets was first highlighted in 2011 by Carbon Tracker’s ‘Unburnable Carbon’ report, which developed the investment thesis that, should we wish to avoid catastrophic climate change impacts and thus limit maximum temperature rises to 2°C, the majority of fossil fuel reserves listed on global stock markets would be ‘unburnable’ – in that the economic value ascribed to the asset would be overstated.

Fossil fuel extractives companies form a significant portion of global stock markets and investment funds. In addition, the supply chain reach of fossil fuels is inescapable in several other economic sectors, including primary industry, energy and transport. This exacerbates the extent to which very many pension funds are exposed to the consequences of fossil fuel asset stranding.

In response to new research we commissioned a detailed study to provide us with information regarding the exposure of the Active Fund to carbon embedded within fossil fuel reserves held by globally listed companies (equity and debt). This work complements our carbon footprinting which focuses on the greenhouse gas emissions from the companies we invest.