Coral Reefs, Soil, Fisheries: The Stranded Assets in Plain Sight
Last week I wrote about discounting and the risk that long time horizons, combined with high discount rates, cause future ecosystem value and risks to disappear from today’s valuations. This prompted some further discussion around broader valuation failures and, crucially, led me to pen today’s article on the implications of not valuing nature and how it is leading to nature-related stranded assets, but in a different way to the fossil fuel assets: for nature it is not inevitable.
Nature is still being treated as if it were infinite
In most financial models of nature-dependent businesses, the underlying natural asset, the reef, the fishery, the topsoil, appears either as a constant or not at all.
Revenues are projected forward. Costs are modelled. The asset is valued. But the ecological foundation on which those revenues depend is left outside the model, implicitly assumed to remain abundant, stable, and available in perpetuity.
That assumption was always wrong. It is increasingly, measurably wrong.
The coal mine problem: why nature is different
The closest and recent analogy are stranded assets in climate finance.
Coal mines were not mis-valued in the 2000s simply because analysts used the wrong discount rate. They were mis-valued because the projected cash flows themselves were wrong. The models failed to price in transition risk, tightening regulation, and the structural shift in energy economics. The underlying asset was priced incorrectly. Everything built on top of that, however technically rigorous, was built on a false foundation.
The same valuation failure is now visible across nature-dependent industries. But here the analogy breaks, and this matters enormously.
Many coal assets were always highly vulnerable to becoming stranded under serious decarbonisation scenarios. Nature-dependent assets do not have to follow the same path (in fact there are very real reasons why it's imperative that they don't, that I may elucidate in a follow up article). A reef that is protected and actively managed can recover. A fishery managed to sustainable yield can rebuild. Degraded soil can be restored. The difference between a stranded reef-dependent hotel and a thriving one is not fate; it is investment, management, and whether the underlying asset is properly recognised and valued in time.
That distinction matters financially. In coal, there was no credible long-term investment case for preserving the asset in a way consistent with the transition. In nature, there is. But that investment case can only be made, and only attracts capital, if the value of the natural asset is properly reflected in the economics of the business that depends on it. At the moment, it usually is not.
The Most Valuable Asset You’re Not Valuing: Nature
Consider a reef-dependent hotel.
Its premium pricing, its occupancy, its ability to offer snorkelling, dive experiences, and a coastline worth visiting, all of this depends directly on the health of the reef. The reef also provides physical protection from wave energy, with coral reefs shown to dissipate up to 97% of incident wave energy, reducing coastal infrastructure costs and insurance risk.¹ It supports the food supply chain. It helps define the identity of the destination.
If there is a credible probability that the reef will be materially degraded within the next five to ten years, through bleaching events, thermal stress accumulation, chronic decline, or some combination, then that risk should be visible in the hotel’s valuation today. Not when the reef has gone. Today. In most conventional valuations, it is still barely visible, if it appears at all. The hotel may already be a stranded asset in the making. Its valuation simply has not caught up with its ecological reality.
But equally, a hotel owner who invests now in reef restoration, monitoring, and resilience is not simply doing the right thing. They are protecting a productive asset that underpins their revenue base. The investment case, properly modelled, can be made. The avoided loss from reef protection is quantifiable. The problem is not that the economics do not work; it is that the asset is not priced, so the economics are never run.
Agriculture: a stranded asset problem already in motion
Coral reefs are not unique in this. The same logic applies to soil.
The FAO’s State of Food and Agriculture 2025 found that around 1.7 billion people live in areas where crop yields have already fallen by at least 10% because of human-induced land degradation.² This is not a future projection. It is current, measured reality.
The Oxford Smith School has documented the mechanism explicitly: farmland and agricultural infrastructure are low-liquidity, long-lived assets, and when the underlying ecological asset, soil quality, water availability, ecosystem services, deteriorates beyond a threshold, they can become stranded in much the same way carbon-linked assets do.³ Cambridge Institute for Sustainability Leadership research with NatWest Group has also shown that degraded land can translate into material income risk for farmers and unmeasured credit risk for lenders.⁴
The parallel to coal is close, but again asymmetric: soil can be restored. Regenerative agriculture, cover cropping, reduced tillage, and better water management can reverse decades of degradation. But that only happens if the investment case is made, and that investment case requires soil health to be reflected properly in asset valuations and lending decisions. At the moment, those differences are still often only weakly reflected in financial models.⁴
Fisheries: the same story, repeating
The same logic applies in fisheries.
Recent research suggests that rebuilding coral reef fish populations could increase sustainable fish yields substantially, providing additional food for millions of people each year.⁵ That is not just a conservation argument. It is an economic argument about the return on managing a productive asset properly rather than liquidating it.
Fishery-dependent businesses that are modelled on overfished, declining stocks are carrying forward-projected revenues that the ecological reality cannot sustain. When the stock collapses, the business model collapses with it. What looked like a viable revenue stream was, in fact, a drawdown of natural capital stock dressed up as income.
The communities that never appear in the model
None of the above is only a financial problem for hotel owners, fishing companies, and agricultural lenders. These natural systems underpin the lives of hundreds of millions of people for whom there is no easy substitute.
Coral reefs alone are commonly estimated to benefit up to one billion people through food, livelihoods, and coastal protection.¹ They also support millions of fishers across tropical countries and remain central to local food systems. Small-scale fisheries, meanwhile, supply around 20% of key nutrients to 2.3 billion people living near coasts or inland waters.⁶ In the Caribbean, reefs generate more than $6 billion annually through fisheries and tourism, with reef tourism representing over 10% of regional GDP.⁷
When financial models exclude the reef, they are not just miscounting a hotel’s revenue. They are also failing to account for a parallel economy that has no other foundation. For many coastal communities, the reef is not simply an input to a business model. It is the economic substrate on which livelihoods, food, and safety are built.
This is not a reason to sentimentalise nature finance. It is a reason to take the valuation problem more seriously. If the financial system correctly valued these natural assets, it would direct capital toward their protection at a scale that currently does not exist. Correctly priced nature does not need charity. It can generate investable returns while also protecting the communities that depend on it.
What correct valuation would actually require
Fixing this is not simply about adding a nature line to an existing DCF. It requires recognising the natural system as a core productive asset of the business, and modelling its future condition the way you would model any other material asset: with realistic scenarios, credible impairment assumptions, and transparent uncertainty ranges.
That means three things simultaneously:
Pricing the asset correctly. Future revenues cannot be projected as if reef, soil, or fish stock condition were constant. If a reef that currently supports a premium destination is likely to be in material decline by 2035 under a medium-emissions pathway, that trajectory belongs in the model.
Recognising impairment. When a building deteriorates, accountants recognise impairment. When the natural asset that underpins a business degrades, it still rarely appears clearly in financial statements or valuations. That is not a minor disclosure gap.
Reflecting the investment case. A properly modelled avoided-loss estimate does not just show risk. It generates an investable case for reef protection, fishery recovery, or soil restoration. The value preserved through intervention is the return on the conservation investment. This is financeable, if the asset is correctly valued in the first place.
The deeper point
In climate finance, the stranded asset argument was ultimately about inevitability: under serious decarbonisation, certain assets were always going to be written down. The financial system was slow to accept it, but the direction was fixed.
Nature finance is different. These do not have to become stranded assets. The question is whether the financial system will correctly value these natural systems in time to make the investment case before the threshold is crossed, or whether it will continue to price them as if they were infinite until they are gone.
The real question is no longer whether nature loss is financially material. It is whether valuation practice will catch up before these assets are impaired beyond repair.
References
NOAA, Coral Reefs Fast Facts; see also Ferrario et al., research on reef wave attenuation.
FAO, The State of Food and Agriculture 2025; FAO summary, “1.7 billion people experience lower crop yields due to land degradation.”
University of Oxford Smith School, Stranded Assets in Agriculture: Protecting Value from Environment-related Risks.
University of Cambridge Institute for Sustainability Leadership with NatWest Group, Land degradation, UK farmers and indicative financial risk.
Recent research on rebuilding coral reef fish populations and sustainable yield gains.
Nature (2025), Illuminating the multidimensional contributions of small-scale fisheries; supporting summaries from WorldFish and related institutions.
GCRMN Caribbean 2025 reporting on reef-linked fisheries, tourism, and GDP contribution.
