An astonishing (and rather troubling) paper was published in Nature a few days ago. It traces the ownership of 43,439 oil & gas production assets through a financial system of 1.8 million companies, to their 'ultimate' owners. Then, it works out what would would happen to the value of these assets if the world moves to cut emissions and limit global heating to 2℃.

The authors used their analysis to figure out who ultimately owns these stranded assets - for example, managed funds, creditors, pensions and banks. They then propagated the effect of losses in asset valuation throughout the financial system of ownership. They found that in only a medium re-alignment of asset valuations, financial companies would face $681 billion of losses.

It turns out that once propagated through the finance industry, majority of these losses will be experienced by the UK and US - see the chart in the link.

So what does it mean? Either,

(a) Oil and gas fields remain at their current valuation, which is consistent with >3degrees of warming (immeasurable suffering all around) OR

(b) We decide to tackle climate change, i.e. oil and gas assets are currently mispriced and will re-align, sending shockwaves through financial portfolios and causing huge losses. Unfortunately not just for big financial institutions but for most individuals with a pension or investments.

There are nuances to the above of course. Great paper overall - Must Read.