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Last edited 03 Oct 2021
The built environment is very complex with multiple stakeholders, long lead times, massive investments and capital risks. One of the key challenges that can be foreseen in adopting a circular economy is the creation of stranded assets.
An asset is an ‘…item, thing or entity that has potential or actual value to an organisation’. Stranded assets are items, things or entities that have suffered from unanticipated or premature write-downs, devaluation or conversion to liabilities, whether that is due to changes in market forces, disruptive innovation, societal norms, environmental parameters or some other unforeseen factor.
The related term, stranded resources, describes resources (rather than assets) that are considered uneconomic for the same reasons as stranded assets. A resource is a source or supply of assets that can be drawn on by a person or organisation and from which a benefit is derived.
- Changes in policy or legislation resulting in regulatory stranding.
- Changes in relative costs/prices resulting in economic stranding.
- Changes in distance/flood/drought resulting in physical stranding.
In the context of the circular economy, stranded assets could be those assets that are most at risk of becoming stranded through the energy transition as society looks to restrict global warming. These assets do not fit into the circular economy, since it may be too costly to preserve them in a manner that is environmentally sensitive.
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- The business case for adapting buildings to climate change.
- UN Sustainable Development Goals.
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