Reporting Carbon Asset Stranding Risks

Carbon Asset Stranding Risks (CASRs) are almost invisible in corporate reports. Notwithstanding the absence of relevant information, there are clear signals that investors are starting to recognize CASRs through various portfolio decarbonisation practices.

This discussion paper addressing CASRs in mainstream reports proposes both amendments to existing legislation and new requirements to reporting laws, standards and practices. The proposed changes are designed to encourage companies to account for and report in a way that enables investors and other users of mainstream corporate reports to identify, assess and respond to CASRs.

Summary of Proposals

  1. Identify the most effective intervention points for bringing about reporting changes necessary to reveal CASRs 
  2. Agree on language for classifying and communicating fossil fuel energy resources in mainstream corporate reports 
  3. Define the scope of fossil fuel energy resources to be reported so as to provide a complete picture of risk beyond the balance sheet 
  4. Content and structure of reporting 
  5. Impairment testing 
  6. Disclosure in the notes and sensitivity analysis 
  7. Support and adopt relevant complementary activity

The financial crisis of the 2000s has been partly attributed to off-balance sheet items and lack of transparency. Preserving the status quo whereby fossil fuel energy resources are sought, invested in, valued and listed on stock exchanges threatens not just environmental, but financial disaster.

CDSB works closely with the Carbon Tracker Initiative who made carbon risk issues real in capital markets.

View discussion paper