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Rising disaster losses

Climate change and extreme weather threaten livelihoods, and hold back growth and sustainable development. The number of disasters and economic and humanitarian losses have been increasing since the 1980s. Economic losses are now $150–$200 billion annually, with damages increasingly located in rapidly growing urban areas in low and middle income countries. Despite knowing this, forecast investment (ex-ante) in disaster risk management (DRM) remains relatively low.

Underestimated benefits of DRM investments

To secure development gains and eradicate poverty it's critical to strengthen ex-ante DRM, building resilience at the household, firm and macro level.

DRM includes:
(i) risk identification, which informs the design of other risk management actions;
(ii) reducing risk, by avoiding the creation of new risk and reducing existing risks;
(iii) physical preparedness, by building capacity;
(iv) financial protection, which builds financial resilience;
(v) resilient recovery and reconstruction, by building-back-better after a disaster.

However, existing methods of appraising DRM investments undervalue benefits associated with resilience. This is linked to the common perception that investing in disaster resilience will only yield benefits once disaster strikes. Decision makers then view DRM investments as a gamble that only pays off in the event of a disaster.

However, there is increasing evidence that building resilience yields significant and tangible benefits, even if a disaster does not happen for many years.

The Triple Dividend of investing in resilience

This report provides evidence for three types of benefits – or dividends of resilience – that DRM investments can yield:
(1) Avoiding losses when disasters strike;
(2) Stimulating economic activity thanks to reduced disaster risk; and
(3) Development co-benefits, or uses, of a specific DRM investment.

Improving the business case for DRM

Understanding all three dividends of resilience and incorporating them in planning and decision making is critical for strengthening the business case for DRM investments. It will remain that the fundamental principle underpinning DRM measures will be to save lives, reduce losses and promote effective recovery from disasters.

However, presenting evidence of additional dividends to policy-makers and investors can provide a narrative that reconciles short and long-term objectives, improving the acceptability and feasibility of DRM investments. Any evaluation of the benefits of DRM investments is incomplete without a full account of all three dividends of resilience.

The analysis of this ‘triple dividend’ can be integrated into a variety of different commonly used appraisal tools. We suggest a framework for conducting more complete appraisals of DRM investments. This will help to show – in addition to preventing human and economic losses during a disaster – DRM investments can actively contribute to wealth, wellbeing, profit, growth and sustainable development.