UK Economy Heading for $141 Billion Loss Caused by Stranded Fossil Fuel Assets
New report from UKSIF and TREX shows global economic exposure to fossil fuel asset stranding risk amounts to $2.28tn by 2040. The UK financial system is itself disproportionately exposed to the stranding risk, ranking 9th globally for losses per capita – more exposed than the United States, Italy, and France.
6th March 2025 (London, UK) – The UK economy is disproportionately exposed to stranded fossil fuel assets, with potential losses for UK pension savers reaching tens of billions of pounds by 2040, according to a new report from the UK Sustainable Investment and Finance Association (UKSIF) in collaboration with Transition Risk Exeter (Trex).
Their analysis traces the complex web of financial ownership of fossil fuel assets and tracks the exposure of end beneficiaries – such as individual investors, pension funds and governments – to the risk of these assets becoming ‘stranded’. This refers to oil, gas and coal reserves, along with associated infrastructure and investments, that lose economic viability before their expected operational lifetimes as a result of climate policies, technological changes, or shifting market conditions.
Based on current green transition policies, mid-term action plans to cut emissions, and long-term net zero targets, the report finds that global economic exposure to fossil fuel asset stranding risk amounts to $2.28tn by 2040 – of which the UK’s exposure is calculated at $141bn. In comparison to the cost of climate inaction, this is still a much smaller loss to bear. In a warming scenario between 2.5°C and 2.9°C, climate-intensified natural disasters may lead to $12.5tn in economic losses by 2050.
Commenting on the report, James Alexander, Chief Executive of UKSIF, said: “With asset stranding presenting a material risk to the long-term health of the UK economy, including the retirement savings of millions of people, it is clear that a carefully controlled transition away from fossil fuels is both an environmental and a financial imperative. Too many oil and gas companies are betting on demand that will not materialise in a decarbonising world, and the public are at risk of paying the bill.
The surest way to offset the risk of losses posed by stranded assets is to invest in industries that will thrive as fossil fuels decline. The UK government must demonstrate global climate leadership by implementing ambitious decarbonisation policies and fostering investment in the growth industries of the future, like renewable energy. Together, the coordinated efforts of investors and policymakers can meaningfully mitigate stranded asset risk while also ensuring that the UK plays a leading role in the global green transition.”
Read more here: UKSIF-Stranded-Fossil-Fuel-Assets-Press-Release-.pdf
About UKSIF
The UK Sustainable Investment and Finance Association (UKSIF) is the membership organisation for sustainable finance in the UK. UKSIF represents a diverse range of financial services firms committed to promoting a more sustainable and resilient financial system. Our 320+ members, managing over £19trn in assets under management (AUM) globally, include investment managers, pension funds, banks, financial advisers, research providers, and NGOs, among others.
For comment from UKSIF contact: Media@uksif.org
