Economists have identified over 300 distinct types of value. We can price derivatives on derivatives. We can value the brand equity of a logo. We can appraise the replacement cost of a factory down to the bolt.
But ask what a wetland is worth, and the answer is usually: nothing. Because it is not on the balance sheet.
This is the valuation gap—and it is perhaps the most expensive blind spot in modern finance.
three words that change everything
Valuation seems straightforward until you realize that cost, price, and value mean different things:
| Term | Meaning | Nature Example |
|---|---|---|
| Cost | What it takes to build or acquire | Wetland restoration: $50K/acre |
| Price | What the market will pay | Land sale price: $5K/acre |
| Value | What it is actually worth | Water filtration services: $500K/year |
For most assets, these three converge. For natural capital, they diverge wildly—because we only measure cost and price, while ignoring value.
the value trinity
Ecological economists recognize three types of value, only one of which traditional finance measures:
instrumental value
This is the value we are familiar with: what nature does for us. Clean water, pollination, flood control, timber, fish. These are services with measurable economic benefits.
Instrumental value can be expressed in dollars. It is the "public goods value" that nature provides for free—estimated at $125-145 trillion per year globally, roughly 1.5x global GDP.
intrinsic value
This is value that exists independent of human use. A species has worth simply because it exists. An ecosystem matters because it is. This is the value that indigenous cultures have recognized for millennia—and that modern economics struggles to incorporate.
Intrinsic value is often called "priceless" or "infinite." This sounds poetic, but it creates a practical problem: when something has no price, it gets zero weight in cost-benefit analysis. The priceless becomes worthless.
relational value
This is the newest category in valuation science: value that emerges from relationships. The connection between a community and its watershed. The identity tied to ancestral lands. The cultural practices that depend on specific ecosystems.
Relational value is not about what nature does for individuals, but what it means to communities across generations.
what indigenous cultures have always known
Modern valuation theory is catching up to wisdom that has existed for centuries:
Whakapapa (Māori) understands genealogical connections between humans, land, and cosmos—a relational value framework that extends across time.
Ubuntu (Southern Africa) teaches "I am because we are"—recognizing that individual wellbeing is inseparable from community and environmental wellbeing.
Buen Vivir (Andean) proposes "good living" in harmony with Pachamama (Mother Earth)—prosperity defined by balance rather than accumulation.
Satoyama (Japan) describes landscapes where human stewardship enhances rather than degrades biodiversity—a model of instrumental and intrinsic value working together.
These are not just philosophies. They are valuation frameworks that capture what DCF models miss.
100+ methods, still learning
The irony is that ecosystem services valuation (ESV) has developed over 100 methods to quantify nature's worth:
| Method Category | Examples | What It Captures |
|---|---|---|
| Market-based | Prices, production functions | Direct use value |
| Cost-based | Replacement cost, avoided damage | Infrastructure value |
| Revealed preference | Travel cost, hedonic pricing | Behavioral value |
| Stated preference | Contingent valuation, choice experiments | Hypothetical value |
| Benefits transfer | Value function transfer, meta-analysis | Scaled estimates |
Meanwhile, real asset valuation uses about 25 methods—and yet commands far more market respect.
The insight: Each discipline has lessons for the other. ESV should adopt the rigor and standardization of real asset appraisal. Real asset valuation should adopt the holistic scope of ESV.
why this matters for investors
If you own land, you own natural capital. If you own companies, they depend on natural capital. If you own anything, its value is exposed to natural capital risk.
The question is whether you are measuring that exposure—or ignoring it because the methods seem unfamiliar.
The Taskforce on Nature-related Financial Disclosures (TNFD) is pushing for standardized reporting. The EU Taxonomy requires nature impact assessment. The SEC is moving toward climate and nature disclosure.
The valuation gap is closing. Those who learn to measure holistic value now will have an advantage over those who wait for regulation to force it.
from measurement to action
RealValue, BASIN's natural capital valuation framework, synthesizes these methods into a practical approach:
- Identify the ecosystem stocks on which your assets depend
- Quantify the ecosystem service flows they provide
- Calculate the replacement cost, avoided damage, or market value
- Layer this on top of traditional appraisal to reveal true value
This is not academic. It is the foundation for ensurance—proactive instruments that fund natural capital protection based on its actual worth.
Explore the 15 ecosystem types that generate value →