ICAEW SE · Chapter 4 · Question 17 of 18
An oil company owns reserves that it may never be able to extract and sell profitably because of tighter climate regulation and falling demand. What term describes these reserves?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) Stranded assets
Explanation
Stranded assets are assets that suffer unexpected or premature write-downs or devaluations, often because of the transition to a low-carbon economy. They are a key consequence of transition risk and are relevant to the valuation of companies in carbon-intensive sectors.
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