“Carbon bubble” and “stranded assets”: Making and governing climate related transition risks
Final Report Abstract
The project examined ways to make up and manage risks at the interface between climate policy and financial economics. The aim was to find out how actors from civil society, politics, and the financial industry perceive and deal with the effects of decarbonization in finance. The empirical focus was on the topics of “carbon bubble” and “stranded assets”: the problem that strict climate politics could contribute to a massive devaluation of fossil assets. In a first step, the project showed how “carbon bubble” and “stranded assets” have become problematic issues in financial economics. Initially, rather than the core institutions of the financial sector – banks, rating agencies, regulators, asset managers, etc. – civil society actors were the driving force to introduce these problems to the financial public. Since around 2010, NGOs and climate activists started to draw attention to the implications of political climate targets for the business practices of fossil fuel companies. They thus “politicized” finance. Activists started divestment campaigns, in which private and institutional investors are called upon to sell shares in fossil fuel companies or to stop granting them loans. However, the project has focused on strategies that address not so much the financial flows but the calculative foundations of finance. As the project has shown, this has introduced heterogeneous forms of knowledge and information (especially carbon accounting) into financial forums. In a second step, the project examined the governance and management of risks stemming from asset stranding, so-called “transition risks”. In the wake of the Paris climate conference, the issue of transition risks increasingly entered the radar of financial regulation. As a result, new attempts have been made that seek to create the basis for better management of financial risks by improving the disclosure of climate-related financial information in companies’ annual reports. The project has shown the process of assembling a standardized reporting infrastructure for climate-related financial information. However, it is questionable whether and how this information is considered by investors when assessing risk, making investment decisions, or selecting portfolios. The analysis of selected techniques employed by institutional investors for valuing and pricing financial risks suggests that the climate-related fundamentals provided by the reporting infrastructure play only a very minor role in risk assessment compared to traditional market data. Ultimately, “price signals” rather than environmental information continue to be the decisive criterion for financial risk analysis.
Publications
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Fossil modernity: The materiality of acceleration, slow violence, and ecological futures. Time & Society, 30(2), 223-246.
Folkers, Andreas
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Energieexzess. Die Geoökonomie fossiler Brennstoffe. In: Dritte Natur. Technik – Kapital – Umwelt. 1/2023. ISBN: 60-73. 978-3-7518-0704-3
Folkers, A.
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Klima und Kapital. Regierung des Lebens zwischen Kohlenstoff-, Kapitalund Informationskreislauf. In: Hoppe K, Rüppel J, Verscheur F, Voigt T (Eds.) Leben Regieren. Biotechnologie, Natur und Gesellschaft im 21. Jahrhundert. Frankfurt am Main. Campus. 293-314.
Folkers A.
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Calculative futures between climate and finance: A tragedy of multiple horizons. The Sociological Review, 73(5), 1104-1121.
Folkers, Andreas
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Risking carbon capital: Reporting infrastructures and the making of financial climate risks. Economy and Society, 53(3), 504-526.
Folkers, Andreas
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Future Theft: Fossil Capitalization, Ecological Dispossession, and Climate Reparations. Theory, Culture & Society.
Folkers, Andreas
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Fossile Moderne. Eine Naturgeschichte der Gegenwart. Berlin: Suhrkamp. (Englische Version unter Vertrag mit: Zone Books. Princeton University Press)
Folkers A.
