Energy transition: A look at stranded assets

Abstract

We examine how information about stranded assets resulting from the energy transition is highlighted in the financial reports published by companies in the oil and gas sector. We analyzed 209 financial reports published by twenty-six companies between 2013 and 2022. The analysis revealed that only four companies disclosed the risks that part of their fossil assets might not be produced in their financial reports, classifying them as stranded assets, representing only 10% of the sample. Most of these disclosures occurred from 2020 onward, aligning with literature indicating that companies have increased their climate-related disclosures recently. We further identified that one company reported that some of its assets had already become stranded, indicating the materialization of this risk and showing that it is a real problem. However, we observed a need for uniformity in how companies conduct this disclosure, raising the need for accounting regulation. Since this is a developing topic, especially in accounting, we want to encourage further research on stranded assets.