Sustainability: Stranded Assets | Deloitte Switzerland

Understanding climate-driven stranded assets and building resilience

Multiple environmental, economic and technological events might trigger asset stranding. New regulations on carbon pricing and pollution controls impose increased compliance costs, while the lower costs of solar and wind energy make carbon-intensive assets less competitive.

Evolving social norms, reflected in divestment campaigns, reduce investors’ appetite for high emission assets. Additionally, companies face growing litigation risks as courts increasingly hold companies accountable for climate-related financial risks³, exposing them to legal obligations for inadequate climate risk management and disclosure.

Climate risks manifest across sectors in tangible ways. As governments worldwide commit to net zero by 2050, carbon-intensive assets such as fossil fuel reserves and coal-fired power plants face the risk of becoming obsolete or uneconomical. Agriculture and forestry face yield reduction and land degradation from shifting weather patterns; this leaves unproductive land stranded and provokes rural displacement. Tourism infrastructure can be made obsolete by climate-driven change – for example, Alpine ski resorts closing due to insufficient snow cover, and coral reefs bleached by elevated sea temperatures.

Asset stranding is accelerating as environmental degradation, technological disruption, and regulatory tightening render carbon-intensive assets economically unviable. Companies that fail to anticipate and disclose these risks face material financial exposure, reputational damage, and stakeholder loss of confidence. Transparent climate risk disclosure and proactive transition planning are therefore essential to remain resilient.

To effectively mitigate these risks companies must therefore integrate climate considerations into their strategic and operational planning. This involves assessing the vulnerability of assets to regulatory, market, and technological changes, and diversifying investments away from high-carbon assets toward sustainable alternatives, investing in clean technologies, and enhancing energy efficiency. Robust scenario analysis and stress testing help to identify vulnerabilities under different climate policy conditions. Furthermore, transparent reporting and stakeholder engagement on climate risks and transition plans build trust and support long-term resilience. By aligning business models with evolving regulatory frameworks and societal expectations, companies can reduce the likelihood of stranded assets and position themselves competitively in a low-carbon economy.