Stranded Assets: Why The World Must Leave Fossil Fuels Behind

Far be it for any fossil fuel organisation to care about public health and the environment. They’ve even stopped worrying about making sound investments. Enter stage left: one of the many concerns we now face because of the climate crisis: ‘stranded assets’. 

Some governments have slowly been introducing legislation and regulations to reduce fossil fuel production and use. Banning coal-fired plants, building larger electrical grids, and focusing on electric transport infrastructure are all promising steps. As time goes on, and as the Net-Zero future grows closer, we’re striving to decrease our dependency on fossil fuels. 

So, what does that mean for the investments and funding that our dearest and nearest banks are giving to the fossil fuel industry? What does it mean for the new gas-fired power plant, or even that fancy new petrol-powered car you’ve bought?  

Well, to be blunt, it means that in about ten years it’s going to be worthless. These are what we call ‘stranded assets’ and they’re about to become a major issue. 

Investing in Our Future...Collapse 

Some banks use our money to invest into virtually anything they believe will generate a return. Unfortunately for us, those same banks seem to suffer from a severe lack of foresight. They focus only on the next shareholder meeting. There, they must deliver increasing profits, or the wealthy executive in charge might have to face the indignity of stepping down with little more than a multi-million-pound golden parachute.

This short-term thinking means banks prioritise what is immediately profitable, paying little attention to future risks. As demonstrated by the 14 financial crises in the US since the 1920s onwards, some financial institutions lack a firm grasp on ethics, long-term planning, and, occasionally, common sense. Public money has consistently been used to fill the gaps when things go wrong. 

In 2008, reckless financing in the form of sub-prime mortgages—fuelled by greed—led to a near-total collapse of the global economy. Banks had invested heavily in what appeared to be highly profitable ventures, until the bubble burst. Some banks failed entirely, taking public savings with them, while others were bailed out by governments—using taxpayer money. 

Now, with banks eagerly funding projects that may only last a decade or two, you might expect them to have learned their lesson. Yet billions of pounds are tied up in assets with rapidly declining value. What could possibly go wrong? 

Another financial crash? Surely not. 

Government Redistribution of Wealth

Further investment in the fossil fuel industry at this stage of the climate crisis is both harmful and increasingly pointless—and not only for the environment. According to limits set by our own politicians, we are expected to reach net zero by 2050. With this hard deadline in mind, governments will need to enforce strict regulations blocking new fossil fuel expansion or exploration. Meanwhile, the rapid pace of renewable energy development will likely make fossil fuels more expensive than renewables, and perhaps even obsolete. Either way, these investments are rapidly losing value. 

Here at Bank.Green, we would not suggest that governments have been entirely ineffective in addressing the climate crisis. However, the donations and lobbying efforts of the fossil fuel industry have clearly delayed the implementation of necessary and urgent changes. As a result, banks have continued to fund projects that are becoming increasingly worthless—all with your money. 

With today’s political leaders relying on the familiar strategy of ‘kick the can down the road,’ future generations could inherit as much as $1.4 trillion in stranded assets. And who will pay for this sudden and ‘unexpected’ loss of value in the fossil fuel industry? If history is a guide, the cost will likely fall on us.

Do you have a pension fund or investments for your retirement? If so, those funds could be at risk, as they may be needed to address this ‘unexpected’ problem in the form of stranded assets. People in the UK and the US alone stand to lose around $756 billion. 

Save Your Pension, if Not the Environment 

Your pension, whether public or private, is undoubtedly held by or controlled by a bank or other financial institution. Almost all of the big ones are heavily involved in funding the fossil fuel industry—a practice driven by short-term profits over long-term sustainability.

It’s worth asking what happens to your retirement savings if a bank collapses under the weight of its own poor decisions. Once a financial institution has invested your money in a project with little or no value—and soon to be worth far less—you might find your savings at serious risk. With little more than short-term thinking and a focus on immediate returns, the big banks could jeopardise your money in the process. 

Your specific pension may not be directly invested in the fossil fuel industry, but if it is controlled by an institution with ties to oil, gas, or coal, it is entirely possible that it could still be affected. Private pensions worldwide, such as the Superannuation pensions in Australia and New Zealand, the RRSP in Canada, and the 401k in the USA, are often linked to industries tied to fossil fuels. If a heavily funded industry like fossil fuels collapses, it may take banks—and your pension—with it. 

Killing Our Communities with Funding 

Many industries rely on fossil fuels to operate, meaning that jobs and communities are at risk—not just the profits of ever-present stakeholders. Fossil fuel-intensive industries such as steelworks, plastics manufacturing, and horticulture have begun transitioning towards renewable energy. However, some industries will not have the option to make that shift. 

Companies focused solely on oil, gas, and coal cannot transition without drastically changing their core business models. These companies are unlikely to survive a complete loss of value in their products and stock prices. 

We know this because it has already happened. In the 1980s, the British government decided to move on from deep coal mining to more efficient fossil fuels, such as natural gas, because coal mining had become unprofitable and heavily reliant on government subsidies. In 1984, miners across the United Kingdom went on strike, demanding that the mines remain open. Around 140,000 miners stopped working, leading to a year-long standoff with the government. Unfortunately for the miners, Margaret Thatcher’s government was unsympathetic, and the strike was defeated. Over the next 20 years, nearly all deep coal mines were closed. 

An estimated 222,000 miners lost their jobs from 1984 up to 2004. Many of these areas continue to suffer from economic decline and poverty. Without efforts to transition workers or modernise industries with new methods and technologies, those jobs simply ceased to exist. 

In many rural areas, communities are built around a single industry, such as coal mining, factory production, or other fossil fuel-dependent sectors. Continued investment in these projects, far from securing the jobs and livelihoods of at-risk communities, only deepens their vulnerability. Many jobs in the fossil fuel industry are unlikely to exist for much longer. 

And now for the big question: who invests heavily in these fossil fuel industries? It’s your neighbourhood bank, of course. 

What Could the Banks Possibly Do? 

In contrast to oil and petrochemical companies, banks have a much easier time transitioning away from creating stranded assets. After all, they could simply stop funding their creation. Now, we understand that this would be quite the moral turnaround for a bank, but life as we know it does hang in the balance. 

Putting a stop to funding fossil fuel organisations, whatever industry they might operate in, could significantly reduce emissions and prevent the creation of these soon-to-be stranded assets. Applying pressure on these companies to transition to renewable energies and environmentally friendly practices would achieve even more. 

After all, banks hold the purse strings for a great many companies and organisations. If they need money, they will do what they are told to do. That is where we come in. If we want our banks to dictate their terms to the fossil fuel industry, we must dictate our terms to them. Remember, it is your money funding the climate crisis, likely against your own wishes. 

Changing Your Mindset 

We all like to see the word ‘investment’ coming from our governments most of the time. It’s reassuring to see local investments—they often signal good things to come: more jobs, more services, more opportunities. 

However, reading a little further, you might notice phrases like ‘power plant,’ ‘gas-fired,’ or ‘energy project.’ More supply might mean cheaper energy in the short term, but at what cost to the planet? 

The next time you see these words, especially when you know they’re not green, consider thinking of them differently. How about viewing them as a ‘massive waste of public resources for limited gain’ or a ‘future financial crash in the making’? 

It certainly shifts the tone of these public announcements, but it’s a more realistic perspective. Banks need to start putting our money where their promises are and act on all the green-tinged rhetoric displayed on their websites. It’s time to transform ‘stranded assets’ into real assets—ones that make a meaningful impact in reducing the climate crisis. 

Bank green or make your bank green for yourself.