Natural plasters can be used in exterior applications. The adobe missions of the south west are plastered with clay &/or lime plaster and many have survived for hundreds of years.
Designing natural plasters for exterior applications involves careful consideration. It should start with a good architectural plan that designs potential weather exposure problems out of the building. Good roof overhangs that shelter the walls from driving rain are important, as is preventing rain from splashing off the ground back onto the wall by having an adequate foundations and proper grading.
People are often surprised that clay plaster can be used outside. Clay is an amazing substance. When the surface is wetted, the particles swell, effectively sealing the surface and preventing water from penetrating. Yet it is extremely vapor permeable, allowing the water vapor created by people inside the building (showering, cooking, breathing) to escape. Trapped water vapor condensing in the walls in the major cause of mold in buildings.
Clay is not waterproof. If exposed to constant liquid water, it will become saturated and erode. Spraying a garden hose against a clay plastered wall for more than a minute will cause erosion — but how often are homes exposed to that kind of abuse? Clay plaster is at good illustrating any moisture issues (rather than masking them as cement stucco can). It is also easy to repair so, though it does wear over time, it is easy to refresh.
Lime plaster erodes much more slowly than clay. If applied properly, lime becomes limestone on the wall and can withstand that same blasting garden hose for quite some time. Lime is not as good at protecting the substrate from damp though because it wicks water through itself to whatever is behind it.
We use systems that combine clay plaster, clay-lime plaster, and lime plaster which can be designed to function very well in most situations. Natural exterior plasters will require maintenance. How much and how frequently depend on the climate and design.
Interested in how different natural plasters erode? Watch our erosion test video on YouTube: http://www.youtube.com/watch?v=1ONmLRWmOa4