ABSTRACT
The risk of stranding is perceived to be of most concern to the coal, oil, and gas sectors. Greater awareness of, and steps to mitigate, climate change could expose some companies to significant operational risks. As environmental regulation grows, banks will have to deal with the challenge of stranded assets on their balance sheets. As environmental, social, and governance concerns become more important to ratings agencies' assessments, carbon price risk management strategies that companies have adopted are helpful in evaluating the net impact on corporate creditworthiness. Energy storage technology is playing a significant role in unlocking the full potential of renewables – and hence is a key component in the transition from fossil-fuel debt. One particular industry with a major presence in the debt capital markets, the US power sector, is witnessing more green issuances. Stranded assets could generate ripple effects on credit quality in the financial markets well beyond their immediate owners.
