Overview of stranded assets risk in the context of climate change - A case study of the power generation sector in Vietnam

A new study by Fair Finance Vietnam aims to assess stranded assets in Vietnam in the context of the country’s relatively high vulnerability to climate change. The study specifically assesses the climate-related factors causing the risk of stranded assets and the impact of these on Vietnam.

Vietnam is one of the most vulnerable countries to climate change. The common patterns of climate change include increased temperatures; rising sea levels; and an increase in extreme weather events, such as storms, heat waves, excessive rainfall, drought, etc. As reported by Espagne et al. (2021), many aspects of the Vietnamese economy, society, and healthcare system are feeling the impacts of climate change. For instance, climate change is expected to have a significant impact on Vietnam’s energy system both in terms of electricity supply and demand. 

Since 2010, the concept of stranded assets has been associated with climate change after environmental policies and other policies related to green energy transition were introduced and implemented. The effects of climate change are believed to be the main driver of stranded assets (Rautner et al., 2016; Reddy and Anbumozhi, 2017). Although this topic of stranded assets has attracted interest from academia, governments, financial institutions, and corporations in many countries, research in Vietnam has been limited. 

This new report “Overview of stranded asset risks in the context of climate change – The case of the power generation sector in Vietnam” is considered a landmark study that paves the way for understanding the relationships between climate change and stranded assets in Vietnam. By studying secondary data and interviewing officials working in energy-sector enterprises, commercial banks, the Ministry of Finance, the State Bank of Vietnam, and the National Financial Supervisory Commission, the report provides an overview of stranded assets and the causes of them in theory, as well as in practice.  

Read full report here.