Monday, February 17, 2014

Carbon bubble & carbon risk valuation tools - AMNT Open Day

The 3rd main speaker at the AMNT open meeting last week was Ben Caldecott (Stranded Assets programme, Smith School of Enterprise, Oxford University)  Ben use to be a fund manager. 

He now researches "Stranded Assets". This is a term which has a long history where due to to changes in the market, long established assets lose their value. He used the examples of "Kodak", "Nokia" and "Betamax". This is usually due to changes in regulation or technological change. But he argued a new risk is environmental unsustainable assets. e.g. Fossil fuel disinvestment.  

The size of the risk to investors is potentially huge.There is a counter argument that the risk is already market priced? We just need the usual capitalist creative destruction and then time to readjust? 

Ben argues that this is not normal risks and that there are systemic risks that need to be fully assessed and stress tested. He thinks that at this moment, the risk is on the whole poorly understood. Which if true (and it probably is) is not good news for investors (nor anyone else for that matter!).

No comments: