---
title: flows over stocks
canonical_url: https://ensurance.app/guide/flows-over-stocks
markdown_url: https://ensurance.app/guide/flows-over-stocks.md
subtitle: "the natural cap rate, the value gap, and what the one number is for"
category: esv
---

# flows over stocks

*the natural cap rate, the value gap, and what the one number is for*

A **natural capitalization rate** is the annual value of what a place does, divided by a stated value of the place itself, shown as a percentage. It is built the way a real estate cap rate is built, net operating income over price, and it is read differently: a cap rate tells an investor what a building pays; a natural cap rate tells anyone what a year of a living system's work has been valued at, beside what that system costs to hold. It compares places, conditions and interventions. It is not a yield. The founder is a CCIM, and the lineage is deliberate: cap rates compare properties; they do not promise returns.

The Demille wetland in Florida, 83 acres of forested wetland, is the worked example. The wetland is a stock: a living system with an extent, a character and a condition. What it does in a year is its flow, and RealValue makes that flow legible in dollars beside what the stock costs to hold. Its flows come to about $1.45 million a year, our estimate, nearly all of it public-goods value rather than cash. On the $267,500 project cost that is about 542%; on the $294,250 entrust value, 493%. The wetland does its work whether or not anyone divides one figure by the other. [Ensurance](/?from=guide) funds the wetland. It is not the ratio.

:::johnson
**flows over stocks is the one number that puts what the place does beside what it costs to hold.** — It is built like a cap rate and read like a comparison. Print the basis with the rate, or the rate means nothing.

[the value gap, and where the money is →](/guide/the-value-gap-is-where-the-money-is?from=guide)
:::

## the two halves

**STOCKS** is the real asset value at a point in time, in dollars, from a declared perspective: the price of the property, the cost of a project, an assessed value, an insurable value, a leasehold value or cost, or the entrust value an account is working toward. The perspective is stated with the figure, because the same wetland answers different questions on different bases. The Field Manual is plain about where this leaves the stock today: it is the real asset's financial value. The Field Manual's hope, stated as a hope, is that the ratio itself begins to move that paradigm, the way a market cap rate comes to set the price of an income property rather than the other way round.

**FLOWS** is the annual value, in dollars per year, with two components. The first is income the property already earns: rent, grazing, timber, crops, energy, a credit sold, the net operating income an appraiser would recognize. The second is the public-goods value of the remaining flows, the ones no one pays for, carried at the borrowed values described in [where the dollar per acre comes from](/guide/where-the-dollar-per-acre-comes-from?from=guide), scaled by extent and condition as in [the same acre is not the same acre](/guide/the-same-acre-is-not-the-same-acre?from=guide). The two are reconciled so that when a flow becomes income, the public-goods line is debited and the income credited and nothing is counted twice.

Flows over stocks:

> **Natural cap rate** = annual FLOWS ÷ STOCKS, shown as a percentage.
> **Financial cap rate** = annual income only ÷ STOCKS. The ordinary cap rate, kept beside it.

## Demille, worked

| Line | Figure | Note |
|---|---|---|
| Land | $207,500 | The purchase price, from our workbook |
| Project cost | $267,500 | Land plus the work to bring it into the account |
| Entrust value | $294,250 | Project cost plus the workbook's 10% risk adjustment; the value the account closes on |
| Income (NOI) | $0 | No rent, harvest or credit sold |
| Annual flows | $1,449,703 | Public-goods value plus income; income is $0 here; our estimate from the value table |
| Financial cap rate | 0% | Income over the entrust value |
| Natural cap rate, at cost | About 542% | Flows over project cost |
| Natural cap rate, entrust basis | 493% | Flows over entrust value |
| Gap, entrust basis | $1,155,453 | Flows minus stocks, this account's convention; the spread between the two cap rates is the full 493 points |

Two rates, both right, answering different comparisons. Against the project cost, the annual flow estimate is about 5.4 times the outlay; against the value the account closes on, a little under five. A reader who meets 493% without the basis cannot tell which question was asked. So the basis travels with the rate.

Two honest notes. The numerator is a benefit-transfer estimate scaled by a condition rank, and a different study set or a different rank would move it a long way; the denominator is a land price that capitalizes only private use. That is why the ratio is high, and why it compares rather than predicts. The beaver riparian example in the same set of workbooks reads about 766%: roughly $6.1 million in valued flows a year over about $798,000, its entrust value. Both are estimates, printed with the numerator and the denominator so anyone can argue with either.

## what the number is for

The Field Manual lists the uses, and they are all comparisons. Compare ecosystems: a wetland's work against a forest's, per dollar of land. Compare polygons: this parcel against the one across the road. Compare condition: the existing wetland against the restored one, which is how an intervention is priced before it is funded. Compare markets: the same work over a cheap acre and an expensive one. Prescribe a value, as an appraisal method and not a forecast of any price: if the natural cap rate of wetlands in a region settles, a wetland's value can be read from its flows the way an income property's is read from its rent. And measure uplift: the change in the ratio after the work is done.

What it is not for is promising a return. A 493% natural cap rate is not 493% a year to anyone. The flows land on the county, the river, the species and the climate, mostly unpaid. The account's job is to make that work legible so the people and institutions that depend on it can help keep the place. Ensurance funds the stock; what it holds and how is described elsewhere. This page is the ratio.

## the value gap

The gap is the dollar form of the same comparison. In the workbook's convention it is annual FLOWS minus STOCKS, $1,155,453 for Demille on the entrust basis; in another reading it is the spread between the natural cap rate and the financial cap rate, the public-goods value the market does not yet recognize. Two things to be careful with. It subtracts a yearly figure from a point-in-time one, so it is a stated convention, not a net present value and not annual cash savings. And it is the account's gap, not nature's: the living system's worth is not the difference between two dollar figures. [The value gap](/guide/the-value-gap?from=guide) holds the philosophy. [The value gap is where the money is](/guide/the-value-gap-is-where-the-money-is?from=guide) holds the buyer's reading. This page only says what the number is.

Appraisal values land at its highest and best use. RealValue puts a second reading beside it, the higher and better use, in which the work the land already does is on the ledger too; [what a real estate appraisal prices](/guide/what-a-real-estate-appraisal-prices?from=guide) carries that contrast, and the natural cap rate is the number that makes the second reading comparable to the first.

## where we are

RealValue has run on real parcels since about 2022. In October 2026 the formulas in seven of those workbooks, Demille and the beaver reach among them, were read and checked cell by cell against the account the app now carries; the method is still in review, and the public view of it is thin. The value table the rates draw on is an admin page. The public doors are [/natural-capital](/natural-capital?from=guide) for the stocks and flows, [/natural-assets](/natural-assets?from=guide) for the places that have been brought into the account, and [/explore](/explore?from=guide) for the map. The series started with the Demille wetland and ends with it: a place, its work, and one number that puts the two side by side. "BASIN is not financializing nature," as the Field Manual puts it. "We are naturalizing finance." The number is a bridge. The wetland is the point.

## frequently asked questions

### what is a natural capitalization rate?

The annual value of an ecosystem's flows divided by a stated value of the underlying real asset, shown as a percentage. It is built like a real estate cap rate, with ecosystem service value in place of net operating income, and it is used to compare places, conditions and interventions, not to promise a return.

### how is a natural cap rate different from a cap rate?

A cap rate is net operating income over price: what a property pays its owner. A natural cap rate is total annual flows, income plus the public-goods value of the ecosystem's work, over the same stated value. The financial cap rate is kept beside it so the two can be read together.

### what is the value gap?

In this account, the difference between the annual flows value and the stock value, or the spread between the natural and the financial cap rate. It is a stated convention for the value the market does not recognize, not a net present value and not annual cash savings. The flows are a year; the stock is a point in time.

## next

If you hold or finance land and want the natural cap rate on a parcel beside its appraisal, [investors](/solutions/investors?from=guide&topic=stocks-and-flows) shows what a natural cap rate looks like beside an appraisal. If you can already name the place, [tell us which](/contact?from=guide&topic=stocks-and-flows).

## sources

[BASIN Field Manual, Natural Cap Rate](https://docs.basin.global/realvalue/the-realvalue-of-natural-capital/natural-cap-rate) — the formula, the use cases, and the 493% example in both forms.

[BASIN Field Manual, STOCKS Values](https://docs.basin.global/realvalue/the-realvalue-of-natural-capital/realvalues/stocks-values) — the declared stock basis, the capitalization approach, and the hope that the ratio moves the paradigm.

[BASIN Field Manual, FLOWS Values](https://docs.basin.global/realvalue/the-realvalue-of-natural-capital/realvalues/flows-values) — anthropocentric and public-goods values and the reconciliation.

[BASIN Field Manual, The RealValue of Natural Capital](https://docs.basin.global/realvalue/the-realvalue-of-natural-capital) — the higher and better use.

[BASIN Field Manual, Why put a value on nature?](https://docs.basin.global/realvalue/why-put-a-value-on-nature) — naturalizing finance.

[Natural capital, the ensurance manual](/manual/natural-capital?from=guide) — the formula and the Demille example.

[The value gap is where the money is](/guide/the-value-gap-is-where-the-money-is?from=guide) — cost, value, price and gap, in order.

## the series

1. [the stocks and flows of natural capital](/guide/the-stocks-and-flows-of-natural-capital?from=guide) (read first)
2. [every acre is one of fifteen things](/guide/every-acre-is-one-of-fifteen-things?from=guide)
3. [nineteen things a place does](/guide/nineteen-things-a-place-does?from=guide)
4. [where the dollar per acre comes from](/guide/where-the-dollar-per-acre-comes-from?from=guide)
5. [the same acre is not the same acre](/guide/the-same-acre-is-not-the-same-acre?from=guide)
6. [flows over stocks](/guide/flows-over-stocks?from=guide)