The benefits of putting insulation on the outside of exterior walls have been known for centuries-simply, it holds the heat inside the building. The problem was how to do it. First, raw insulation materials, left exposed to the weather, would fall apart. Second, the coatings needed to protect the insulation would crack or disintegrate.
BASF, the giant German chemical company, figured out how to make tiny hollow granules of styrene plastic and then expanding them and fusing them together in a mold: EPS. Weather-stable paints and adhesives were developed to attach the foam to the wall and to coat the foam. Voila: synthetic stucco.
This technology really took off after World War II as a way to re-insulate war-damaged buildings in Europe. When in Europe nowadays, a lot of what looks like stucco is actually EIFS.
EIFS came to North America in the ’60s and is now a mainstay for exterior wall construction, due to its good looks, great insulation and reasonable cost.