The University of Oxford launch a new research programme to help businesses and policy-makers future proof against investments in assets that might become devalued or written off, otherwise known as ‘stranded’. Assets become stranded for a number of different reasons: they can be supplanted by greener alternatives or technological innovations; or in sectors experiencing change due to new regulations or resource constraints.
Asset stranding is currently little understood, but the implications are potentially very significant for polluting investments. The programme researchers, based at the Smith School of Enterprise and the Environment, aim to find out which assets and sectors are most at risk and evaluate how investors, businesses and policy makers can best respond to the challenges.
To mark the launch, Rt Hon John Gummer, Lord Deben, Chairman of the Committee on Climate Change, will give a lecture at the School, highlighting the need for businesses and policy makers to adapt to the new economic landscape. He said: ‘Investors continue to deploy hundreds of billions of pounds into polluting and unsustainable sectors. In many cases these investments will not be worth what investors think. Climate change, scarcer resources, and new disruptive technologies will reduce value and strand assets. If investors better understand the risks of investing in these assets they will be attracted to greener alternatives and see them as better business propositions and safer places for their funds. The programme is doing the further research necessary to help underpin this vital transition.’
Professor Gordon Clark, Director of the Smith School, said: ‘We are looking at how changes in regulation, pricing, technology, society and climate could be a risk to a range of polluting assets and how this could be a material risk to the investors and businesses involved, as well as for policy makers and regulators. Our new programme is creating a critically important space for these issues to be understood and for appropriate responses to be developed.’
The four-year research programme aims to identify high-carbon sectors and assets that could be dramatically devalued or written off. The first project will focus on the international supply chain for the agricultural sector, examining methods of transportation and production. Other studies, to be commissioned as the programme develops, are likely to include transport, power generation, real estate and a range of commodities.
Through the programme, the researchers will better understand and inform current policy debates, particularly around issues like systemic risk and financial regulation. They aim to create new, robust tools to actively understand and manage the risks of asset stranding. They will also conduct analyses of investor portfolios to build an understanding of risk exposures and develop relevant best practice case studies to inform decision-making.
Ben Caldecott, a Visiting Fellow at the Smith School and Head of Policy at Climate Change Capital (an investment manager and advisory group specialising in the opportunities generated by the transition to a low carbon economy) said: ‘The implications of an economy-wide over-exposure to fossil fuel investments could be even more severe and wide-ranging than those of the recent financial crisis. Regulators need to figure out how to make the transition from the old high-carbon economy and carefully deflate a bubble in environmentally unsustainable assets.’
The programme is being supported by Aviva Investors, Bunge Ltd, Climate Change Capital Ltd and HSBC Holdings plc, with non-financial partners including the Carbon Tracker Initiative, Trucost and WWF-UK.
For more information, contact the University of Oxford Press Office on +44 (0)1865 280534 or email: press.office@admin.ox.ac.uk
Notes for Editors:
The Smith School of Enterprise and the Environment
The Smith School of Enterprise and the Environment based in the School of Geography and the Environment is an interactive hub within Oxford University that engages with, educates and equips public and private enterprise with the solutions, knowledge and networks needed to address the major environmental challenges facing our planet. For more information, go to www.smithschool.ox.ac.uk/
Professor Gordon Clark
Professor Gordon Clark FBA, Halford Mackinder Professor of Geography at Oxford University, is director of the University’s Smith School of Enterprise and the Environment. He took up the new position in January 2013 succeeding the founding director, Professor Sir David King. Professor Clark is an economic geographer with an interest in global financial integration and environmental sustainability. He is currently leading research into the responsibilities and behaviours of institutional investors in corporate engagement and environmental management.
Ben Caldecott
Ben Caldecott is Head of Policy at Climate Change Capital (CCC), the environmental banking group. He directs the the company’s policy research centre and advises clients and funds on climate change, clean energy and sustainability and on the development of policy-driven markets. Ben has been recognised as a leader in his field by the US Department of State and Who’s Who, and as ‘a leading thinker of the green movement’ by The Independent.
Futures Programme on Asset Stranding
The unanticipated or premature write-off, downward revaluation or conversion to liabilities of assets ('asset stranding') is a feature of capitalism. Asset stranding of this kind regularly results from changes in technology and regulation. But recent developments in clean energy, physical climate risk and the green growth agenda have introduced new risk factors for environmentally unsustainable assets that may make them more prone to stranding than previously thought. In order to help investors, businesses, policy makers and regulators understand the drivers, implications and responses to the potential stranding of environmentally unsustainable assets, the University of Oxford's Smith School of Enterprise and the Environment (SSEE) has established the Futures Programme on Asset Stranding.
The Programme will look at how changes in regulation, pricing, technology, society and climate could be a risk to a range of these assets and how this could be material to investors and businesses, as well as for policy makers and regulators who are responsible for the stability of the economic and financial system as a whole.The main objective for the Programme is to develop and socialise a better understanding of the asset, sector and systemic risks that may exist and how these could change over time, as well as to create methodologies and tools that can equip organisations to do further work themselves or collaboratively. For more information.
Consultative Panel
The programme will be overseen by a consultative Panel chaired by Professor Gordon Clark, Director of the SSEE and including:
Yvo de Boer, former head of the UN Framework Convention on Climate Change
James Cameron, Chairman, Climate Change Capital
Catherine Howarth, CEO, FairPensions
Ben Goldsmith, Founder, WHEB Ventures
Michael Liebreich, Founder and CEO, Bloomberg New Energy Finance
David Nussbaum, CEO, WWF-UK
Paul Simpson, CEO, Carbon Disclosure Project
Simon Upton, Director, Environment Directorate, OECD
Steve Waygood, Chief Responsible Investment Officer, Aviva Investors
Rt Hon John Gummer, Lord Deben
The Rt Hon John Gummer, Lord Deben is Chairman of the Committee on Climate Change. He also runs Sancroft, a Corporate Responsibility consultancy working with blue-chip companies around the world on environmental, social and ethical issues. He was the longest serving Secretary of State for the Environment the UK has ever had. His sixteen years of top-level ministerial experience included Minister for Agriculture, Fisheries and Food, Minister for London, Employment Minister and Paymaster General in HM Treasury. In two hundred years, only five others have held so long a period of office. His experience as an international negotiator has earned him worldwide respect both in the business community.
