“The next Big Short is Nature”: The man behind the $620 trillion reckoning

While artificial intelligence steals all headlines, a quieter and far larger story is forming beneath the surface, one that has been centuries in the making. illuminem sits down with Martin R. Stuchtey – co-founder of McKinsey's global sustainability practice and SYSTEMIQ, and now CEO of the pioneering NatureFinTech The Landbanking Group – for the most critical conversation that no investor, banker, insurer, or finance minister can afford to miss.

Weeks before its release, his new upcoming book "Too Big to Bail – A Playbook for Recapitalizing the Living World" has already been endorsed by pioneering economist Lord Nicholas Stern and renowned Earth-system scientist Johan Rockström, the architect of the "planetary boundaries" framework.

illuminem is proud to present an exclusive preview of a thesis set to redraw the foundations of finance: the living world is the collateral beneath the entire financial system, and it has just begun to reprice – with staggering consequences for everyone.

In 2005, in northern California, a former physician named Michael Burry did what almost nobody else in finance had done. He opened the mortgage bonds the rating agencies were stamping triple-A and read the individual loans inside them, line by line. The safest collateral in the world, he found, was a stack of debts that would never be repaid. He bet against it, sat through two years of losses, and was proved right when the loans defaulted and wiped out some $11 trillion of American household wealth. His edge came down to a single habit: asking what the collateral actually was.

One man is now asking Burry's question of the largest asset class on Earth: nature itself. In an exclusive interview, illuminem sat down with Martin R. Stuchtey, co-founder and leader of McKinsey's global sustainability practice and of SYSTEMIQ, and now CEO of the pioneering NatureFinTech The Landbanking Group, who is the spearhead of a growing movement recognising that every loan, bond and currency ultimately rests on a functioning natural world.

Some $620 trillion of financial wealth stands on that foundation, more than 50 times larger than the entire mortgage market that nearly brought down the system in 2008, and not a cent of it is booked on any balance sheet, in any register, at any price. History may be about to repeat itself on a far greater scale, according to Stuchtey… Actually, the first signs are already showing.

"Nobody asks what really stands behind all these claims that we call wealth," Stuchtey tells illuminem. All of it, he says, "only works if rain continues to fall, if soil continues to yield, if forests continue to cool, if water continues to flow."

Stuchtey began his working life, improbably, as a trained geologist, mapping mineral deposits in southern Africa – an unlikely apprenticeship for a man who would go on to challenge the foundations of modern finance. He later went on to study business economics and write a doctorate on externalities – costs that markets leave off their books – a question that first took him to McKinsey. Yet even at the centre of global capital, he was increasingly uneasy.

"I always had a split heart," he shares with illuminem. He had grown up close to nature in his native German countryside, and could see it degrading. Still, he had also mastered the economic models and come to love them "because they make reality look so clean and easy." The two, he says, "don't go together": they rest on fundamentally different assumptions.

The turn came in Florida, in 2005. Stuchtey was in the state helping a logistics client expand its air fleet when Hurricane Katrina made landfall.

"I saw billions and billions of damages being created through a climate event," he recalls, "and yet we were happily ordering airplanes," on the assumption that destroying nature came at no cost. He pulled out of conventional client work and co-founded McKinsey's global sustainability practice, then left the firm entirely to chase a larger question: what, as he puts it, would "a better system" actually be?

The ventures that followed grew steadily more radical, by design. He wrote "A Good Disruption – Redefining Growth in the Twenty-first Century". He also co-founded SYSTEMIQ in 2016, which was one of the first firms to merge advisory and investment to drive the sustainability transition at a systemic level. Its team now comprises several hundred professionals across seven offices all the way from London, Munich, Paris, and Amsterdam to Jakarta and São Paulo. Then, with his wife Sonja Stuchtey, came The Landbanking Group in 2022, the pioneering NatureFinTech that builds the infrastructure that lets governments, companies, banks, and land stewards see the value of nature – and act on it. He calls the apparatus the Nature Stack: measure it, price it, pledge it.

Much of it, he insists, is indeed already built and in use.

"Insurers are the best seismographs for the underpricing of risk," Stuchtey tells illuminem. By his reading, the alarm bells are already sounding. Insurers have walked away from some $424 billion a year of nature-related catastrophe losses, more than they pay out.

Whole districts of Florida, California and Europe's floodplains are becoming structurally uninsurable, which soon means unmortgageable. Even the data centres behind the AI boom have met the limit, with roughly $85 billion of American projects cancelled in three years, most of it over water risks.

"We live in a dream world," he says. "We have phantom prices, given that the collateral underneath has started to default and to fail." And if that collateral goes, there is no rescue. A central bank can conjure the money to refloat a failed lender. Nature, he says, is "too large, too complex, too distributed and too correlated to offer itself to a bailout." What was "too big to fail", as U.S. Congressman Stewart McKinney put it, could be bailed out. Nature cannot.

The world has not been blind to this: in recent years a whole apparatus of disclosure rules, the TNFD, the CSRD and the rest, has tried to force nature onto corporate books. But, by Stuchtey's account, "so far disclosure and natural capital accounting has not changed capital allocation." They "largely ended up where they were never destined for: in sustainability reports and in footnotes, far from the accounts a business or bank has to answer for".

Stuchtey, who lectures resource strategy and management at the University of Innsbruck, says that reporting was never the point; recognition is. Recognition means nature enters the decisions that set a price: the loan a bank writes, the premium an insurer charges, the capital a regulator demands, the discount rate an investor applies. Only when nature changes the number, not the footnote, does capital move.

The novel arguments form the foundations of Stuchtey's upcoming book, Too Big to Bail, set to be unveiled to the leaders in finance and policy at the DLD Nature Salon in Berlin, the United Nations COP31 in Antalya, and later at the World Economic Forum in Davos.

Its importance lies not only in the courage and clarity with which it brings this subject to a global audience for the first time, but also in Stuchtey's ability to distil it into twelve concrete actions to take before the market reprices without them.

Because once investors and lenders begin to see the consequences, the turn will be abrupt: "a very sudden stampede from going short on nature to going long on nature will logically ensue," or as American economist Hyman Minsky described – slowly and then suddenly. Every balance sheet still carrying nature at zero, on his account, is on the wrong side of that trade.

Anyone who has spent a sufficiently long career in markets has heard often enough that the system is broken to grow numb; indeed, many warnings come to nothing. But one cannot shake the feeling that, every so often, the outsider reading the fine print might have seen what the insiders had stopped looking at. When confronted with the Burry parallel of the lone contrarian, Stuchtey did not flinch: "Well, Michael Burry was proved right, wasn't he?"

As the interview came to a close, Stuchtey left us with a wager. Burry made his fortune betting that the collateral under Wall Street's bonds was worthless. The next fortune goes to whoever bets that the collateral under everything else – the living world – is worth far more than the zero it is carried at. In 2008 the collateral failed and nobody had looked. This time it is failing in plain sight.

We made that mistake once. We cannot claim the excuse twice.

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