10 things to know about finance for reducing disaster risk

Books or book chapters
March 2015
Charlene Watson; Alice Caravani; Tom Mitchell; Jan Kellet, Katie Peters

Please see the accompanying full report, 'Finance for reducing disaster risk: 10 things to know' for the data sources and references used.

The current discussion around the financing of disaster risk reduction (DRR) remains unsatisfactory. What little literature exists on DRR finance relates predominantly to the transfer of risk through insurance and reinsurace and is driven largely, but not exclusively, by private sector insurance companies (e.g. Swiss Re, 2008; Cummins and Mahul, 2010; UNEP FI, 2014). Work is now also emerging on the financial cost of DRR inaction in the face of growing disaster risk (World Bank, 2014). There remain few publications that systematically address issues in DRR finance, such as outlining the funding opportunities that exist in the current international and national landscape, what activities are being or could be funded and whether finance is being targeted and allocated to the right places (Kellett and Sparks, 2012; Kellett and Caravani, 2013; Kellett and Peters, 2014). Instead, the rhetoric remains around inadequate scales of finance that support short term, piecemeal interventions and rarely cover the full suite of actions required to effectively reduce disaster risk at the scale and duration required (ISDR, 2009a; ISDR, 2011).

This is, in part, a result of the way in which the DRR debate and practice has evolved. Reference to financing in the Hyogo Framework for Action (2005 to 2015) is inadequate with little mention of financial commitments or tools. Compounding this, the DRR finance that exists is not sufficiently tracked, though tracking itself can create the perverse incentive of encouraging separation from wider financing flows. As the community rightly moves to articulate DRR as something to be mainstreamed in all investment decisions, public or private, it becomes harder to explicitly identify the DRR finance sources, channels, their instruments and their outcomes. However, without an improved understanding of DRR finance, as the financial flows that act to reduce disaster risk, it is increasingly complex to generate synergy and complementarity between national and global development priorities and finance streams. Ensuring all investment flows are disaster resilient presents a substantial opportunity to reduce rather than generate risk, an increase in which could slow development and economic progress.

Finance for reducing disaster risk: 10 things to know focuses on the basics of DRR finance and the opportunities that the Post-2015 development finance landscape can offer. In the Post-2015 Framework for Disaster Risk Reduction – the successor to the Hyogo Framework for Action (HFA) – it is imperative that the discussion on financing is elaborated. This accompanying report to the '10 things to know about finance for reducing disaster risk’ provides a clear overview of the needs and trends in DRR finance, the available channels and a nuanced narrative to capture the attention of decision-makers and stakeholders in advance of the Sendai World Conference on Disaster Risk Reduction (WCDRR).