World Disasters Report: Resilience: saving lives today, investing for tomorrow
Chapter 3: Time to act: investing in resilience
An ounce of prevention is worth a pound of cure
Despite progress in disaster risk reduction (DRR) and climate-change adaptation, overall investment remains relatively low and the costs of disasters continue to rise (World Bank, 2012; UNISDR, 2015). Both the number of disaster events and their related economic and humanitarian losses have been increasing steadily since the 1980s. Economic losses from extreme weather events are now in the range of US$ 150 – US$ 200 billion annually, with an increasing share of damages located in rapidly growing urban areas in low- and middle-income countries (GFDRR, 2015). The adverse impacts of climate change – extreme weather events, climate variability and uncertainty – are a significant threat to livelihoods, and restrict equitable growth and sustainable development.
International financing for DRR is increasingly being channelled through climate-change adaptation funds; between 2002 and 2014, 13 per cent of total multilateral adaptation finance (US$ 405 million) was categorized as disaster prevention and preparedness, with wider effective adaptation actions themselves also contributing to enhanced resilience. The development of new funds is likely to improve international investment flows for resilience, including through the Green Climate Fund (GCF) under the UN Framework Convention on Climate Change, which has received public sector pledges of more than US$ 10 billion. In contrast to DRR through international aid, funding for DRR through adaptation funds has shown to be more focused on low-income countries. This is illustrated by the large amounts approved for DRR by adaptation funds such as the Least Developed Country Fund (US$ 147.67 million) and the Pilot Program for Climate and Resilience (US$ 187.99 million) (Caravani, 2015).
A stronger business case for investing in resilience
Despite the growing emphasis on resilience in international policy frameworks, investment is not happening at the rate needed to curb rising disaster-related losses. Although some countries, cities and communities have made progress in anticipatory actions, post-disaster response measures still dominate (Kellett et al., 2014).
There are many reasons for this underinvestment in disaster resilience. These include lack of resources, limited understanding of risks and impacts, and a bias towards funding and political visibility of post-disaster assistance (Wilkinson, 2012; World Bank, 2013). Crucially, policy-makers tend to underinvest or not invest at all in projects to manage risk because the costs of such investments are visible and immediate, whereas their benefits are dependent on a disaster event occurring. Existing methods of appraising investment decisions often fail to incentivize investing in resilience as they undervalue the resulting benefit streams.
Reducing damages and losses
Investing in resilience can yield a wide range of benefits, but the central rationale and common focus for disaster risk management and climate-change adaptation is associated with saving lives, reducing losses and supporting both individuals and communities to bounce back from disasters quickly and effectively. The UNISDR’s Global Assessment Report (2015) estimated that annual global investment of US$ 6 billion would generate total benefits from risk reduction of US$ 360 billion; this is equivalent to an annual reduction of new and additional annual loss of more than 20 per cent (UNISDR, 2015).
Reducing background risk and the development dividend
While losses have tended to be the focus of business cases for investing in resilience, the risk of disasters creates ‘background risk’ also, which constrains investment in capital productivity, forward-looking planning, long-term capital investments and entrepreneurship for fear of disaster events eroding returns (Hallegatte et al., 2016). When levels of background risk are high, households lacking effective risk-management tools will tend to engage in a wider range of lower-risk activities rather than specializing. Such diversification can spread risk, but it also often reduces returns to assets and investments. Although these types of action reduce the risk of severe losses, they can prevent pathways to greater prosperity and incentives to invest as well (Carter and Barrett, 2006; Dercon, 2005).
Co-benefits of resilience investments
Most disaster risk-management investments serve multiple purposes, and are not solely designed to reduce disaster impacts and offer co-benefits that are related to levels of risk. Strengthened river embankments can act as pedestrian walkways, parks or roads; strengthened disaster early-warning systems also often improve weather-forecasting capacity, which can be used by farmers to know when to plant and harvest; or disaster shelters can be used as schools or community spaces, when not being used as shelters. These multiple uses of DRR infrastructure form cost-saving co-benefits that materialize even in the absence of a disaster, strengthening the immediate business case for investing in DRR.
Building resilience from below: inclusion and accountability
Investing in resilience is not only about committing financial resources; mechanisms for ensuring accountability are also needed if these investments are to meet the needs of vulnerable communities. Accountability is the capacity of relevant actors to take responsibility for their actions or commitments, as well as the ability of others to hold them to account (Newell and Bellour, 2002). The accountability of government and other investors in resilience to vulnerable communities can be enhanced through a number of mechanisms including parliamentary oversight, participatory budgetary processes and risk assessments, and through the media and communications activities (including use of big data). All these have the potential to increase transparency in how resources are allocated and distributed, and help improve the chances that investments meet their objectives.
The need is urgent
To safeguard and promote improvements in human well-being and planetary security, investing in resilience must become a priority around the world. There is evidence of increased investment flows in DRR and climate-change adaptation across a range of scales, backed by a supportive set of international policy frameworks, but the rising losses from disasters suggest that much more needs to be done globally. Addressing barriers to investment are critical, including ensuring that investment decisions can be taken in the face of uncertainty surrounding future climate-related and other risks.
These investments will be made more attractive by taking into account the full range of benefits provided by anticipatory risk-management actions. At the same time, such investments must protect the needs and rights of the poorest and most vulnerable people of the world, including through bottom-up processes of accountability and inclusion to enable investments in building resilience to be effective. Blended sources of finance are required that strike a balance between accountability and the need to use domestic finance where possible. Adaptive social protection is a useful example of this, and can be applied in other areas of development.
Chapter 3 was written by Thomas Tanner, Research Associate, Risk and Resilience Programme, Overseas Development Institute (ODI), and Emily Wilkinson, Head of Risk and Resilience Programme, ODI, London, UK, with assistance from Pandora Batra. Box 3.1 was written by Ben Ramalingam, Leader, Digital and Technology Cluster, Institute of Development Studies, Brighton, UK; Box 3.2 by David Nash, Community Impact Manager, Zurich Flood Resilience Program, Zurich, Switzerland; Box 3.3 by Hilary Tarisai Dhliwayo-Motsiri, Senior Officer Livelihoods, Food Security File, Community Preparedness and Risk Reduction Department, IFRC, Geneva, Switzerland; Box 3.4 by Petr Kostohryz, Country Director, Norwegian Refugee Council (NRC), Amman, Jordan; and Box 3.5 by Sumaiya S Kabir, Planning, Monitoring and Reporting Officer, UN Women, Hanoi, Viet Nam.
Sources and further information
Caravani A (2015) Does adaptation finance invest in disaster risk reduction? Overseas Development Institute (ODI), London, UK.
Carter P M R and Barrett C B (2006) The economics of poverty traps and persistent poverty: an asset-based approach. The Journal of Development Studies, 42(2):178–199.
Dercon S (ed.) (2005) Insurance against poverty. Open University Press, Oxford, UK.
GFDRR (Global Facility for Disaster Reduction and Recovery) (2015) Investing in resilience. The World Bank, Washington DC, USA.
Hallegatte S, Bangalore M and Jouanjean M A (2016) Higher losses and slower development in the absence of disaster risk management investments. World Bank Policy Research Working Paper No. 7632. Washington DC, USA.
Kellett J, Caravani A and Pichon F (2014) Financing disaster risk reduction: towards a coherent and comprehensive approach. Overseas Development Institute (ODI), London, UK.
Newell P and Bellour S (2002) Mapping accountability: origins, contexts and implications for development. IDS Working Paper No. 168. Institute of Development Studies, Brighton, UK.
UNISDR (UN Office for Disaster Risk Reduction) (2015) Making development sustainable: the future of disaster risk management. Global Assessment Report on Disaster Risk Reduction. Geneva, Switzerland.
Wilkinson E (2012) Transforming disaster risk management: a political economy approach. ODI Background Note. Overseas Development Institute (ODI), London, UK.
World Bank (The) (2012) Social resilience & climate change. Financial innovations for social and climate resilience: establishing an evidence base. Washington DC, USA.
World Bank (The) (2013) World Development Report 2014. Risk and opportunity: managing risk for development. The World Bank, Washington DC, USA.