Public talk/ Fachhochschule Graubünden, Chur/ Finance research seminar
Market-implied stranded-asset risk propagates through the financial market
Dr. Ruting Wang, City University of Hong Kong
The speaker
Dr. Ruting Wang is a Postdoctoral Researcher at City University of Hong Kong and was awarded the 2024 "Hong Kong Scholar" Fellowship. She is a research member of the IDA Institute for Digital Assets and of MSCA Digital Finance. Her research interests lie in corporate finance, asset pricing, and climate risk.
She serves as an Associate Editor of Digital Finance and of Management & Marketing. Her work has been published in leading journals including Economic Modelling, Quantitative Finance, and Emerging Markets Review.
- Corporate finance
- Asset pricing
- Climate risk
- Hong Kong Scholar 2024
The talk
Stranded fossil-fuel assets are typically measured as physical losses, but far less is known about how these losses are priced, amplified, and transmitted through financial markets.
In this study, we combine stranded-loss estimates for Chinese energy listed firms with stock-market data to trace this propagation mechanism. We show that the amplification is economically large: the firm-level physical-loss multiplier reaches 2.55, and propagated economic loss from a single source firm can reach 2.38 billion RMB.
The transmission network is strongest within fossil extraction and fuel processing, but it also extends across the energy supply chain. We further show that the characteristics of different Five-Year Plan periods shape the patterns of stranded-loss propagation. By simulating alternative future transition pathways, we find that a diversified low-carbon transition pathway generates the lowest stranded-loss propagation, whereas a targeted carbon-intensive transition pathway leads to the highest propagation.
What the study measures
Estimates for Chinese energy listed firms, combining stranded-loss estimates with stock-market data. Amplification is strongest in fuel processing; the largest absolute losses sit in fossil extraction.
How the loss is traced
- Transition scenarios Extraction pathways for Chinese coal under alternative policy scenarios set how much capacity is retired early.
- Stranded loss at the mine Foregone profits are discounted to a present value, giving each miner a physical stranded loss out to 2060.
- Ownership pass-through Losses are allocated to listed owners and parent firms through their ownership shares.
- Pricing in the stock market A stranded-risk factor, purged of standard risk factors, measures each firm's market exposure to that loss.
- Propagation across firms Tail-risk connections between firms turn one firm's shock into implied market-value losses at every firm it reaches.
Four Five-Year Plans, four propagation patterns
- 11th / 2006-10 Onset. Energy-intensity and pollution targets; transition risk barely registers in prices.
- 12th / 2011-15 Broadening. Green development becomes national strategy; losses are concentrated but large.
- 13th / 2016-20 Concentration. Emissions trading and non-fossil targets; losses stay concentrated in high-carbon firms but decline.
- 14th / 2021-25 System-wide. Renewables and EV support; losses spread thinly across the whole energy chain, and grow.
Policy orientation, more than the size of the underlying physical loss, determines where the propagation lands.
Transition pathways, simulated
Relative stranded-loss propagation under the simulated pathways. The ordering is the study's result; bar lengths are indicative only.