A stranded asset is something that's worth less on the market than it is on a balance sheet.
How does that happen?
The example that always leaps to mind for us is oil. It's an asset that could be owned by a fossil fuel company but still tucked away underground as nature intended. In this case they might have discovered an oil field and have gained the extraction rights, but they still need to establish whether or not it will be profitable to drill, process and deliver the ‘asset’. Put another way, if the market price of the asset is expected to be lower than the cost involved in getting it to market, there would be no point in spending company money to extract it. The shareholders would be up in arms!
Many things can lead to an asset becoming stranded.
Subsidies are being removed, the delivery price of renewable energy plummets each year, limits are being placed on the production of fossil fuel. All of this is beginning to challenge the fossil fuel industry. We believe that this could lead to valuations on company balance sheets not being a true indication of market value from an investment point of view.
It's all good though...
Our portfolios aim to reduce the impact of stranded assets on your investment. There's a wide and expanding universe of positive investment assets out there (think renewable energy for example) delivering reliable, growing returns without damaging the environment or the underlying value of your investment.
We can review your pension or investment (for free) and check to see whether your money is currently held in any assets which could potentially become stranded. Get in touch here to get the ball rolling, and get ready to give your money more purpose!