Stranded asset
ESG & GovernanceAn asset that loses value earlier than expected, or must be retired early, because of changes such as climate policy, new technology or falling demand.
Coal mines, coal power plants and oil and gas reserves are the usual examples. If the economy decarbonises faster than a company's plans assume, part of its asset base may never earn the returns it was built for, leading to impairments. Stranding risk depends on each asset's age, efficiency, location and use, so it should be assessed asset by asset.
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