Financing for disaster risk reduction (DRR) has been at best a very low priority over the past two decades, making up a tiny fraction, 0.4%, of overall investments in development aid. In this period, the international community committed just over $107 billion to disasters and most of it was spent on response.
This is inadequate and markedly inequitable, with little consideration of the potential magnitude of risk and realized risk- or actual losses and damages.
Since 2003, the financing of DRR has been roughly at about 10 per cent of overall financing on disasters each year. The investments are driven by few large post-disaster projects rather than by systematic DRR that include local community preparedness and capacity development for risk informed development. In 2005, for example, four DRR projects accounted for $993 million. The 2010 peak was attributable to a single cyclone risk mitigation project worth $252.6 million in India and Japan’s climate risk financing of $147 million across 14 countries.
The largest share of DRR financing has gone for flood prevention and control, mostly through heavy infrastructure projects. In 20 years, these funds have decreased from 90 per cent to 57.7 per cent of overall DRR funding.
What exactly should the international community be funding?
Arguably the financial ‘heavy lifting’ of risk reduction should be left to national governments, so that international actors can focus on ‘kick-starting’ projects, on technical advice and on technology transfer.
This tendency, however, has led to a concentration of funds in just a handful of middle-income countries. Two middle income countries in Asia, account for 22 per cent of the total DRR financing of $3 billion.
Meanwhile, some low-income but high disaster risk countries have received negligible financing for DRR. These countries suffer from recurring disasters and have differing capacity issues that demand international support beyond response and reconstruction.
While this concentration of funding amongst a small number of middle-income countries is conspicuous, the financing is also significantly fragmented.
A relatively small number of projects account for the vast majority of the overall funding. For example, just 33 projects account for $6.9 billion (50 per cent) of all DRR financed over the 20-year period. During the same period, , there are over 3,000 individual projects with funding equivalent to just $235,112 per project.
To date, little work has been done to calculate the transaction costs and capacity burden to developing countries in managing all these individual projects and in dealing with donor relations and their varying approaches to financing the reduction of disaster risk.
Investments to strengthen disaster resilience remain volatile, partly due to lack of information on the direct and indirect socioeconomic impact of disasters, as losses and damages are often not fully recorded. It also reflects insufficient understanding of public investment processes and possible opportunities to integrate risk reduction measures into development planning,
The international community must take stock of the way it provides support to national governments, what is the role of international financing and how funds from other sources can be brought to bear.
The future, therefore, is not just about more money from aid organizations or governments, but also about better financing — more integrated and suitably coordinated, and well targeted.