💸 Some new stranded assets goodies (December 2024)

A Roosevelt-looking figure discovering some unhappy news. By Charles Spencelayh (1933) - currently on view at the Ashmolean Museum's "Money Talks" exhibit

Happy Friday - and a happy Friday it is because I just re-submitted a manuscript response to reviewers (🥳🍷) about the stranded assets problem in food systems transitions. I first sploshed ink on this piece in, I kid you not, May 2023. It is so satisfying (and painful, but also satisfying) to see how a piece evolves over 18 months+ from an embarrassing mess to an actual piece of hopefully-helpful thinking.

Working on the revisions gave me an excuse to do a little Google on what's come out on stranded assets since I last checked. So much great stuff and I love to see it. Not all related to food, but all absolutely relevant and important for what we're trying to do in food systems.

From Stranded Assets to Assets-at-Risk: Reframing the narrative for European private financial institutions

The brilliant Natasha Chaudhary from I4CE published this brilliant report that argues for a modest-but-actually-hugely-important re-framing of stranded assets within private financial institutions (banking for high-net-worth individuals). She argues that the action item on stranded assets it not "Mmmm ok, we'll factor that into our risk model and see how it goes," - the end result of which is pretty much "Oh, no risk of a meat tax in the USA, so we're good. Thanks for checking!"

She argues that instead of waiting around to see if investing in, say, the meatpacking sector starts to look riskier, private FI's need to be ahead of the game and proactively manage the assets they own that are linked to industries-in-the-cross-hairs. This segues beautifully into this desperately needed piece...

Towards a sociology of stranded assets

from Valentina Ausserladscheider at the U of Vienna and Cambridge. This is one of those you can really tuck in with, it's so cozy ☕️. She eloquently articulates (with a wild example from the ski tourism industry! ⛷️) what is one of the critical tensions inherent in the stranded assets issue - that it hinges on how likely investors think it is that the future will be different than the past. Rather than stranded assets just being an matter of properly factoring the likelihood of meaningful policy change into risk models (which Chaudhary points out is difficult to quantify, to say the least), Ausserladscheider says, "...it is the actors’ interpretation of the future and the associated future asset value that guides decision-making, which is a deeply social, cultural, and political process."

If you don't think climate change is that serious - or, more to the point, if you don't think policymakers are serious about climate change - there's no reason to do anything about stranded assets...because you don't think they'll be stranded. Conundrum!

When I tell someone in finance that I work on stranded assets in the cattle and beef sector, the first thing they say is, "But isn't meat consumption going up?" (i.e. "Isn't there no risk of those assets being stranded?") As Ausserladscheider helpfully draws out, this question is driven by how they see the future which is more based on socio-cultural-political inclinations than environmental science. Surprise - how people in industry see the future is not informed by the EAT-Lancet report.

A framework for supporting climate-exposed asset decision-making in agriculture

And yay! A stranded assets paper about food systems! Joanne Tingey-Holyoak and colleagues from the University of South Australia focus on if/how Australian farmers should factor risks from climate change into their accounting practices for their long-lived assets so they can avoid stranded assets.

It's great to see researchers start to think about stranded assets in food and ag - although it did make me wonder what farmers would actually change if they did start factoring climate into their decision-making when they are already operating under so many market constrains. Also, even the world's largest financial institutions have a hard time predicting climate risks at a fine-enough spatial scale to be useful. How are farmers supposed to do it (as one farmer they interviewed shared)?

Much to think about going into a rainy, cosy weekend 🌧️ Hopefully my son's football match will be cancelled so we can make waffles 🧇. Cheers!