when externalities become opportunities

"I'm going to extract clean air."

Say that at an investment conference and watch the room freeze. Extract clean air? The word itself feels wrong — extraction is what we do to nature, not for it.

But sit with it. What if someone built a business around producing as much clean air as possible, found people willing to pay for it, and scaled relentlessly? What if they "extracted" pollination by creating pollinator habitat? "Extracted" clean water by restoring wetlands? "Extracted" climate stability by protecting forests?

Why would that be bad?

The only scenario where it's harmful is if they stopped producing — if they depleted the source. But that's precisely what distinguishes regenerative extraction from the extractive industries we've normalized.

two kinds of extraction

The word "extraction" carries the weight of centuries. We think of mines, oil rigs, clearcuts — industries that take finite resources until they're gone. But extraction has a second meaning we've forgotten: to draw out, to derive, to obtain benefit from.

The difference isn't the word. It's what you're extracting, and whether the source regenerates.

Traditional extraction targets stocks — oil, coal, minerals, old-growth timber. These are finite. Every barrel pumped, every tree felled, every ton mined reduces what remains. The business model requires depletion. Eventually, you exhaust the resource and move on.

Regenerative extraction targets flows — the continuous stream of services healthy ecosystems produce. Clean water filtered by wetlands. Carbon sequestered by forests. Pollination from functioning habitat. Climate regulation from intact systems. These flows renew as long as the underlying stocks remain healthy.

The stocks and flows framework is the key: ecosystems (stocks) produce ecosystem services (flows). Maintain the stock, harvest the flow forever. Enhance the stock, the flows compound.

the 19 extractable flows

Nature produces 19 categories of ecosystem services that can be "extracted" indefinitely:

Provisioning flows: Raw materials, food, energy, water abundance, healthy soils, medicinal & genetic resources

Regulating flows: Climate stability, clean air, clean water, risk resilience, pollination, erosion control, pest & disease control

Cultural flows: Habitat, recreation & experiences, research & learning, aesthetic & sensory value, art & inspiration, existence & legacy

Every one of these has market value. Every one regenerates if the source is maintained. Every one is currently underpriced or unpriced entirely — treated as an externality.

These flows come from somewhere. The 15 ecosystem stocks — inland wetlands, temperate forests, tropical forests, grasslands, coastal systems, rivers and lakes, and more — are the source. Each stock type produces its own mix of flows. Invest in healthy stocks, harvest abundant flows. Neglect the stocks, and the flows disappear.

when others externalize, you can internalize

Here's the opportunity buried in the word "externality."

An externality is simply a cost or benefit that isn't included in market prices. When economists call nature's destruction an "externality," they're acknowledging that value exists but isn't being captured by current transactions.

Externalities are unpriced value.

When real estate appraisal ignores nature, properties are undervalued by 10-50% or more. When corporate accounting externalizes ecosystem dependencies, supply chain risks go unmanaged. When financial markets treat ecosystem services as free, they're leaving infinite returns on the table.

This isn't a market failure in the usual sense. It's a market opportunity.

When others externalize value, those who internalize it capture the gap.

If your competitor treats their watershed dependency as an externality and you invest in its protection, you have resilience they don't. If the market prices land without recognizing ecosystem service flows, acquiring that land gives you yield they can't see. If carbon, water, and biodiversity are priced at zero, producing more of them is arbitrage against a mispricing that must eventually correct.

The investors who recognized this earliest — who saw externalities as opportunities rather than problems — will benefit as markets wake up to what they've been ignoring.

the natural cap rate

This isn't abstract. The math is concrete.

Natural cap rate = ecosystem service value (flows) ÷ real asset cost (stocks)

When you calculate the annual value of ecosystem services a natural asset produces and divide by its acquisition cost, you get returns that make traditional investments look modest: 131% to 766% in documented examples.

How? Because land markets price only what conventional appraisal recognizes — largely ignoring the 19 flows continuously produced. The gap between what ecosystems are worth and what land costs is the opportunity.

Collapse cost → 0. No rent-seeking, no debt service on the land itself, no holding nature hostage for appreciation.

Secure flows → ∞. The instrumental value of ecosystem services protects what is intrinsically priceless.

Natural cap rate ⇒ ∞. If infinite seems too abstract, the real yields are documentable in both dollars and percentages.

the systems we've normalized

Here's what's strange: we don't question profit from systems of death.

Oil extraction: Deplete ancient carbon stocks, emit climate-destabilizing gases, generate returns for shareholders. Normal.

Industrial timber: Clearcut forests that took centuries to grow, eliminate habitat, export logs. Normal.

Factory farming: Concentrate animals in conditions that breed disease, pollute watersheds, accelerate antibiotic resistance. Normal.

Mining: Blast mountains, poison aquifers, leave tailings that leach toxins for generations. Normal.

These industries profit by depleting stocks that don't regenerate on human timescales. They externalize massive costs — climate change, biodiversity loss, health impacts — onto everyone else. We call this "the economy."

But suggest that someone could profit by producing clean air, enhancing biodiversity, creating climate stability — and suddenly it sounds suspicious. "Greenwashing." "Financializing nature." "Too good to be true."

Why is profit from death normal and profit from life suspect?

the only real risk

The critique of regenerative extraction has one valid form: what if the producer depletes the source?

This is the risk with any extraction — traditional or regenerative. If an oil company exhausts a field, they move on. If a regenerative producer degraded their ecosystem to harvest more flows short-term, they'd face the same dead end.

But here's the difference: the incentives point opposite directions.

Traditional extraction profits from depletion. The faster you pump, the more you earn. Sustaining the resource means leaving money in the ground.

Regenerative extraction profits from enhancement. The healthier the ecosystem, the more flows it produces. Degrading the source reduces your yield. The business model requires you to maintain and improve natural capital.

Regenerative extraction aligns profit with ecological health. Traditional extraction opposes them.

This is why ensurance works. Instruments that generate returns from ecosystem service flows create incentives to protect and enhance the source. The more you care for the asset, the more it produces, the more you earn.

instrumental serves intrinsic

None of this means reducing nature to dollars.

The instrumental value of ecosystem services — the flows we can measure and price — serves the intrinsic value of nature that exists beyond any measurement we could make.

We don't price the forest. We create instruments that fund the forest's protection. The coin is not the wetland. The certificate is not the watershed. They are tools for channeling care into capital and capital into stewardship.

"We are not financializing nature. We are naturalizing finance." — Jeff Stephens

Financialization brings nature into finance's logic: optimize, extract, maximize. Naturalization brings finance into nature's logic: circulate, nourish, regenerate. Capital flows like water through the system, and living systems are the source.

the question isn't whether to extract

Extraction is happening regardless. The question is: extraction of what, and for whom?

Traditional extraction depletes stocks, concentrates profits, and externalizes costs onto communities and ecosystems that had no say.

Regenerative extraction harvests flows, distributes proceeds to stewards, and internalizes value that others leave on the table.

One model ends in exhaustion. The other compounds indefinitely.

The externality gap won't last forever. Markets eventually price what they've been ignoring — through regulation, through crisis, through the slow recognition that infinite-horizon costs can't be infinitely deferred.

The investors who recognized unpriced value before markets corrected will hold assets that others suddenly want. The producers who built capacity for regenerative flows will supply demand that others can't meet. The protocols that created infrastructure for nature-positive returns will route capital that has nowhere else to go.

getting started

If externalities are opportunities and regenerative extraction is the mechanism, the practical question is: how do you participate?

As an investor:

• Recognize that land priced without ecosystem services is undervalued
• Look for natural assets with high flow-to-cost ratios (natural cap rate)
• Consider ensurance instruments that generate yield from ecosystem health

As a landowner:

• Your natural assets may be worth far more than their market price suggests
• Ecosystem service valuation reveals what appraisers miss
• Ensurance structures can unlock value without selling the land

As a business:

• Map your dependencies on ecosystem services — your hidden suppliers
• Externalities you ignore are risks you're not managing
• Internalizing them before competitors do is a strategic advantage

See ensurance instruments in action — coins, certificates, and agents channeling capital toward regenerative extraction. Or explore how it works for the mechanism behind the opportunity.

the bottom line

Externalities are not just problems to solve. They are value that markets have failed to recognize — and opportunity for those who see it first.

Regenerative extraction is not a contradiction. It's the only extraction that sustains itself — profiting from life rather than death, enhancing the source rather than depleting it, aligning financial return with ecological health.

The systems of death are normalized. The systems of life are emerging.

The question is which side of that transition you want to be on.