It’s well known that fossil fuels are a limited resource. But recently investors have become increasingly focused on the notion of the “carbon bubble,” which hypothesizes that concerns over climate change could lead governments to mandate energy companies to keep a significant portion of their oil, gas and coal reserves “stranded” in the ground.
While no one knows for sure how lawmakers in the U.S. and abroad will tackle the issue, it’s clear that the potential for stranded assets in the energy sector has significant implications for the global economy.
Leveraging Bloomberg’s unique ability to quickly translate ideas into tangible tools for investors, we’ve developed a tool called the “Bloomberg Carbon Risk Valuation Tool.” It will provide data and analytics around the concept of stranded assets and help our clients protect against the potential risks and unexpected swings in markets they could cause. We’ve also publicly released a white paper that takes a closer look at the issue.
While still in its beta phase, the Carbon Risk Valuation Tool is intended to be a conversation-starter on this emerging risk. In the longer term, as new data and methodologies become available and we receive feedback from clients, we hope to expand the tool so that it incorporates other environment-related risks, such as flooding or severe weather — all of which could result in stranded assets.
If you’re a Bloomberg terminal subscriber, check out the Carbon Risk Valuation Tool at XLTP XCO2 <GO>.
Contributed by Dan Doctoroff, Chief Executive Officer and President of Bloomberg L.P.