Case study: Stranded asset analysis & managed decline — a startup-to-enterprise scale story

Carbon Tracker Initiative estimated in 2025 that $3.5 trillion in fossil fuel assets worldwide face stranding risk under a 1.5 degree Celsius pathway, yet fewer than 18% of asset owners had conducted formal stranded asset analyses on their portfolios as of Q4 2024 (Carbon Tracker, 2025). Into this gap stepped a new category of climate analytics firms, building tools that quantify transition risk at the individual asset level and model managed decline pathways for carbon-intensive infrastructure. The journey from startup pitch deck to enterprise-grade platform reveals hard lessons about data quality, client resistance, regulatory timing, and the operational realities of building technology that challenges incumbents' balance sheets.

Why It Matters

The scale of potential asset stranding is accelerating. The International Energy Agency's 2025 World Energy Outlook projects that under stated policies, approximately $1 trillion in upstream oil and gas assets will become uneconomic before the end of their technical lifetimes by 2035. Coal power plants face even steeper exposure: Global Energy Monitor tracked 267 GW of coal capacity in OECD countries operating beyond their economic retirement date in 2025, continuing to run only because owners lack structured frameworks for orderly wind-down (Global Energy Monitor, 2025).

For asset owners, lenders, and insurers, the absence of rigorous stranded asset analytics creates a compounding problem. Without granular, asset-level transition risk data, capital allocation decisions rely on backward-looking financial metrics that systematically understate climate-related write-down exposure. Regulators have begun forcing the issue: the European Central Bank's 2024 climate stress test required 109 banks to model asset stranding scenarios across their loan books, and the Bank of England's 2025 guidance explicitly references managed decline as a supervisory expectation for high-carbon exposures (ECB, 2024; Bank of England, 2025).

Key Concepts

Stranded assets are physical or financial assets that suffer unanticipated or premature write-downs, devaluations, or conversion to liabilities due to climate policy, technology shifts, or market evolution. The concept extends beyond fossil fuel reserves to include pipelines, refineries, thermal power plants, industrial facilities, and even real estate in climate-vulnerable locations.

Managed decline refers to the planned, orderly reduction in output and eventual decommissioning of carbon-intensive assets in a way that minimizes economic disruption, protects workers and communities, and aligns with climate targets. Unlike abrupt asset abandonment, managed decline involves structured timelines, reinvestment commitments, and stakeholder engagement.

Transition risk modeling quantifies the financial impact of decarbonization pathways on specific assets using variables including carbon pricing trajectories, technology substitution curves, demand destruction scenarios, and regulatory phase-out timelines.

What's Working

Carbon Tracker's Analytical Framework Becomes Industry Standard

Carbon Tracker Initiative, founded in 2011 as a nonprofit think tank, pioneered the concept of stranded assets in fossil fuel markets. Their initial reports on the "carbon bubble" were largely theoretical exercises. By 2020, the organization had developed asset-level databases covering 95% of global coal capacity, 80% of oil production, and 70% of gas production. The transition from think tank to data provider followed a deliberate path: Carbon Tracker licensed its asset-level datasets to Bloomberg Terminal and Refinitiv starting in 2022, making stranded asset metrics available alongside conventional financial data for the first time. By 2025, over 400 institutional investors with combined assets under management exceeding $40 trillion referenced Carbon Tracker data in their portfolio analysis workflows (Carbon Tracker, 2025).

The key product-market fit insight was that investors did not want standalone stranded asset reports: they wanted transition risk metrics integrated into existing portfolio management tools. Carbon Tracker's pivot from publishing PDF reports to delivering API-accessible, asset-level data feeds unlocked enterprise adoption. Their coal plant economic analysis tool, which models retirement dates based on operating costs versus wholesale power prices in each local market, became a reference standard for utilities, regulators, and investors globally.

Planetrics (Now Part of McKinsey) Scales Climate Scenario Analytics

Planetrics, a London-based climate analytics startup founded in 2017, built a platform that translated Intergovernmental Panel on Climate Change (IPCC) climate scenarios into asset-level financial impacts. The firm's approach was distinctly bottom-up: rather than applying sector-level assumptions, Planetrics modeled individual facilities using geospatial data, technology specifications, regulatory exposure, and local market conditions. By 2021, the platform covered over 40,000 physical assets across energy, mining, utilities, and heavy industry.

The startup's enterprise breakthrough came through partnerships with asset managers facing Task Force on Climate-related Financial Disclosures (TCFD) reporting requirements. Planetrics demonstrated that its models could quantify the portfolio-level value at risk under different temperature pathways, expressed in basis points of return impact rather than abstract carbon metrics. McKinsey acquired Planetrics in 2022 for an undisclosed sum, integrating its analytics into McKinsey Sustainability's advisory practice. By 2025, the combined platform served over 60 financial institutions including sovereign wealth funds, pension systems, and global banks conducting regulatory stress tests (McKinsey Sustainability, 2025).

Repsol's Managed Decline Playbook

Spanish oil major Repsol became the first large European energy company to adopt a comprehensive managed decline framework when it announced a 4.8 billion euro asset impairment in 2019, writing down the value of upstream exploration and production assets that would become uneconomic under its self-imposed $40 per barrel long-term price assumption. The company subsequently published a managed decline roadmap that committed to reducing oil and gas production by 25% by 2030 while reinvesting capital into renewables and low-carbon businesses.

By 2025, Repsol had retired or divested 14 upstream assets, closed its Tarragona refinery complex (repurposing the site for green hydrogen and bio-materials production), and redirected $7.2 billion in capital from exploration to clean energy. The managed decline approach preserved 73% of affected workforce positions through retraining and redeployment programs. Repsol's market capitalization increased 28% between 2019 and 2025, outperforming the European integrated oil and gas peer group average by 15 percentage points, suggesting that transparent managed decline can create shareholder value rather than destroy it (Repsol, 2025).

What's Not Working

Data Gaps Undermine Model Credibility

Asset-level transition risk modeling depends on granular data about facility economics, operating costs, remaining useful life, contractual obligations, and decommissioning liabilities. For publicly traded companies, some of this information is available through regulatory filings and industry databases. For privately held assets, state-owned enterprises, and emerging market operations, data gaps are severe. Planetrics estimated in 2024 that its models relied on imputed or proxy data for 35 to 45% of asset-level cost assumptions in non-OECD markets (Planetrics, 2024). This data uncertainty propagates through scenario models, producing confidence intervals so wide that they limit decision-making utility.

The problem is particularly acute for coal assets in South and Southeast Asia, where 78% of global coal capacity under construction is located. Detailed operating cost data, power purchase agreement terms, and government subsidy structures for individual plants in India, Indonesia, Vietnam, and Bangladesh are often unavailable or unreliable. Several analytics firms have resorted to satellite-derived proxies for plant utilization rates and emissions intensity, but these cannot substitute for the financial data needed to determine stranding timelines.

Client Resistance to Uncomfortable Outputs

Stranded asset analytics often produce conclusions that challenge existing capital allocation decisions and management assumptions. Several analytics providers reported that enterprise clients pushed back on model outputs, requesting methodology changes that would reduce apparent stranding risk. One firm documented cases where clients asked for carbon price trajectory assumptions 30 to 50% below International Energy Agency reference scenarios, or requested exclusion of regulatory phase-out policies that had already been legislated but not yet enforced. This tension between analytical integrity and commercial pressure represents a structural challenge for the sector, echoing the conflicts of interest that plagued credit rating agencies before the 2008 financial crisis.

Managed Decline Plans Lack Enforcement Mechanisms

Corporate managed decline commitments remain largely voluntary, with limited regulatory backstops. Of the 28 European oil and gas companies that published managed decline or production reduction targets between 2020 and 2025, eight subsequently revised their timelines outward by 3 to 7 years, citing energy security concerns following Russia's invasion of Ukraine (Transition Pathway Initiative, 2025). Without binding regulatory frameworks or financial penalties for missed targets, managed decline plans function more as investor relations tools than operational commitments.

Key Players

Category	Organization	Role
Established	Carbon Tracker Initiative	Pioneered asset-level stranded asset analytics for fossil fuels
Established	MSCI	Integrates transition risk and stranded asset metrics into ESG ratings
Established	S&P Global	Provides climate scenario analysis and asset-level risk scoring
Startup	Planetrics (McKinsey)	Built bottom-up climate scenario analytics platform for financial institutions
Startup	Riskthinking.AI	Develops AI-driven physical and transition risk models for asset portfolios
Startup	OS-Climate	Open-source climate risk analytics platform backed by Linux Foundation
Investor	Impax Asset Management	Pioneered transition-aligned investment strategies avoiding stranded asset exposure
Investor	LGIM (Legal & General)	Active engagement with portfolio companies on managed decline commitments

Action Checklist

• Conduct asset-level stranded asset screening across all carbon-intensive portfolio holdings using at least two independent climate scenarios (1.5 degree and stated policies)
• Integrate transition risk metrics into quarterly investment committee reporting alongside conventional financial risk measures
• Evaluate managed decline plans from portfolio companies for credibility: check for binding capital expenditure commitments, workforce transition budgets, and specific decommissioning timelines
• Stress test loan portfolios against accelerated stranding scenarios, including carbon prices of $100 to $200 per tonne and fossil fuel demand destruction of 3 to 5% per year
• Engage with data providers to understand methodology limitations, particularly proxy data usage for non-OECD assets and sensitivity to key assumptions
• Establish internal governance for handling stranded asset findings that conflict with existing investment positions, including escalation procedures and independent review mechanisms
• Map regulatory requirements for climate stress testing and stranded asset disclosure across all operating jurisdictions (ECB, Bank of England, APRA, Fed/OCC)
• Develop or adopt managed decline frameworks for directly owned carbon-intensive assets, including reinvestment plans, workforce transition programs, and community impact mitigation

FAQ

Q: How do stranded asset analytics differ from conventional financial risk analysis? A: Conventional financial analysis primarily uses historical data and near-term market conditions to assess asset values. Stranded asset analytics incorporate forward-looking variables that traditional models ignore: carbon pricing trajectories over 10 to 30 year horizons, technology substitution curves (such as renewable energy cost declines displacing thermal generation), regulatory phase-out timelines, and physical climate impacts on asset productivity. The time horizons involved (typically 2030 to 2050) exceed most financial modeling frameworks, requiring integration of policy scenario analysis and technology forecasting that sits outside traditional financial analyst skill sets. The key methodological challenge is translating these macro-level transition drivers into asset-specific financial impacts at the facility level.

Q: What types of assets face the highest stranding risk? A: Coal-fired power plants face the most immediate and quantifiable stranding risk, with Carbon Tracker estimating that 72% of global coal capacity is already more expensive to operate than building new renewable energy in the same market. Upstream oil exploration assets committed to projects with break-even costs above $60 per barrel face significant stranding under most transition scenarios. Gas-fired power plants, initially seen as "transition fuels," face growing stranding risk as battery storage costs decline and grid flexibility markets evolve. Beyond energy, industrial assets including cement kilns, blast furnace steelworks, and petrochemical crackers face stranding risk as low-carbon alternatives scale and carbon pricing intensifies.

Q: Can managed decline create value for shareholders, or does it only destroy value? A: Evidence from early movers suggests that managed decline, when executed transparently and credibly, can preserve or create shareholder value. Repsol's experience demonstrates that proactive impairment and capital reallocation can be rewarded by markets. The mechanism is straightforward: by recognizing future losses in the present and redirecting capital toward growth opportunities, companies avoid the value destruction of delayed, disorderly write-downs. Research from the Transition Pathway Initiative found that companies with credible managed decline plans traded at 8 to 12% premium valuations relative to peers with comparable asset bases but no transition plans, as of 2025 (TPI, 2025). The caveat is that markets reward credibility: plans without binding commitments, clear timelines, or adequate capital allocation are discounted.

Q: How should regulators approach stranded asset risk in the banking system? A: The emerging regulatory consensus, reflected in ECB and Bank of England guidance, centers on three pillars: mandatory climate stress testing using standardized scenarios (typically Network for Greening the Financial System scenarios), enhanced disclosure of concentrated exposures to high-stranding-risk sectors, and supervisory expectations for banks to demonstrate how they are managing transition risk in their lending portfolios. The most advanced approach is the ECB's requirement that banks quantify potential credit losses under disorderly transition scenarios and demonstrate adequate capital buffers. Regulators face a balancing act between forcing early recognition of transition risk (which strengthens financial stability) and avoiding a credit crunch that could destabilize carbon-intensive sectors before alternatives are available.

Sources

• Carbon Tracker Initiative. (2025). The $3.5 Trillion Stranding Risk: Asset-Level Analysis of Fossil Fuel Portfolios Under 1.5C Pathways. London: Carbon Tracker.
• Global Energy Monitor. (2025). Global Coal Plant Tracker: OECD Coal Capacity Operating Beyond Economic Retirement Date. San Francisco: GEM.
• European Central Bank. (2024). 2024 Climate Stress Test: Results and Supervisory Expectations. Frankfurt: ECB Banking Supervision.
• Bank of England. (2025). Supervisory Statement SS3/25: Managing Climate-Related Financial Risks, Including Managed Decline Expectations. London: Prudential Regulation Authority.
• Repsol. (2025). Strategic Update 2025: Managed Decline Progress and Clean Energy Transition Report. Madrid: Repsol S.A.
• Transition Pathway Initiative. (2025). State of Transition 2025: Corporate Climate Commitments and Managed Decline Credibility Assessment. London: Grantham Research Institute, LSE.
• McKinsey Sustainability. (2025). Climate Risk Analytics: Methodological Framework and Institutional Adoption Report. London: McKinsey & Company.
• International Energy Agency. (2025). World Energy Outlook 2025: Stranded Asset Exposure Under Stated Policies and Net Zero Scenarios. Paris: IEA.