The Triple Dividend of Resilience Realising development goals through the multiple benefits of disaster risk management Thomas Tanner, Swenja Surminski, Emily Wilkinson, Robert Reid, Jun Rentschler, Sumati Rajput © 2015 Overseas Development Institute (ODI), International Bank for Reconstruction and Development / International Development Association or The World Bank. Overseas Development Institute 203 Blackfriars road London SE1 8NJ Telephone: +44 (0)20 7922 0300 www.odi.org The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 www.worldbank.org This work is a product of the staff of ODI and The World Bank with external contributions. The views present in this report are those of the author(s) and do not necessarily represent the view of ODI or The World Bank, its Board of Executive Directors, or the governments they represent. ODI and The World Bank do not guarantee the accuracy of the data included in this work. 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Executive summary 9 1.1 Rising disaster losses 9 1.2 Underestimated benefits of DRM investments 9 1.3 The Triple Dividend of investing in resilience 9 1.4 Improving the business case for DRM 10 2. The case for investing in resilience 12 2.1 Disasters, poverty and development 12 2.2 Incentivising ex-ante DRM 13 3. The Triple Dividend: a comprehensive business case for resilience 14 4. The First Dividend of Resilience: saving lives and avoiding losses 17 4.1 Saving lives and reducing people affected 17 4.2 Reducing damages and losses 18 5. The Second Dividend of Resilience: unlocking economic potential 21 5.1 Increased business and capital investment 21 5.2 Household and agricultural productivity dividends 22 5.3 Land value dividends from protective infrastructure 24 5.4 Fiscal stability and future credit risks 24 6. The Third Dividend of Resilience: Co-benefits of DRM investments 26 6.1 Ecosystem-based co-benefits 27 6.2 Transport co-benefits 29 6.3 Agricultural co-benefits 30 7. Recommendations for decision-makers: Integrating the Triple Dividend of Resilience in DRM appraisals 32 7.1 Define the problem and its context 32 7.2 Identify and apply tools and methods for empirical analysis of DRM 32 7.3 Communicate outcomes 33 Further reading 34 References 34 08 ACKNOWLEDGMENTS This report is an output of an initiative funded by the Global Facility for Disaster Reduction and Recovery (GFDRR) at the World Bank and led by the Overseas Development Institute (ODI). The report was written by Thomas Tanner (ODI), Swenja Surminski (London School of Economics and Political Science), Emily Wilkinson (ODI), Robert Reid, Jun Rentschler, and Sumati Rajput (World Bank), with inputs from Lindsey Jones, Emma Lovell, and Catherine Simonet (ODI), Mook Bangalore, Carter Brandon and Stephane Hallegatte (World Bank), Stephany Griffith-Jones (Columbia University), Reinhard Mechler (IIASA), Tom MacDermott (LSE), Adam Rose (University of Southern California), and Francis Vorhies (Earthmind). We gratefully acknowledge the helpful review comments on this and earlier drafts from Anna Locke (ODI), Javier Baez, Juan Jose Miranda Montero, Oscar Anil Ishizawa Escudero, Marc S. Forni, Leonardo Garrido, Francis Ghesquiere, Rashmin Gunasekera, and Niels Holm-Nielsen (all World Bank). Design was by Mads Freund Brunse. Copy-editing was by Holly Combe. Suggested citation: Tanner, T.M., Surminski, S., Wilkinson, E., Reid, R., Rentschler, J.E., and Rajput,S. (2015) The Triple Dividend of Resilience: Realising development goals through the multiple benefits of disaster risk management. Global Facility for Disaster Reduction and Recovery (GFDRR) at the World Bank and Overseas Development Institute (ODI), London. www.odi.org/tripledividend 1. Executive summary 1.1 Rising disaster losses makers to view DRM investments as a gamble that only pays off in the event of a disaster. However, The adverse impacts of climate change and extreme there is increasing evidence that building resilience weather events are a severe threat to livelihoods, yields significant and tangible benefits, even if a and hold back growth and sustainable development. disaster does not happen for many years. The total number of disaster events and related economic and humanitarian losses have been increasing steadily since the 1980s. Economic losses 1.3 The Triple Dividend of from extreme weather events are now in the range investing in resilience of $150–$200 billion annually, with an increasing share of damages located in rapidly growing urban This report provides evidence for three types areas in low and middle income countries. However, of benefits – or dividends of resilience – that despite widespread awareness of these rising losses, DRM investments can yield: (1) Avoiding losses investment in ex-ante disaster risk management when disasters strike; (2) Stimulating economic (DRM) remains relatively low. activity thanks to reduced disaster risk; and (3) Development co-benefits, or uses, of a specific DRM investment. While the first dividend is the most 1.2 Underestimated benefits of common motivation for investing in resilience, the DRM investments second and third dividend are typically overlooked. More specifically: To secure development gains and help eradicate poverty in the long-run, it is critical to strengthen 1. The First Dividend of Resilience – saving lives ex-ante DRM measures that build resilience at and avoiding losses: The basic rationale and the household, firm and macro level. The process common motivation for DRM investments is to save of disaster risk management includes (i) risk lives, reduce losses and promote effective recovery identification, which informs the design of other from disasters. While it is the most obvious of risk management actions: (ii) reducing risk, by benefits from DRM investments, it is not easy to avoiding the creation of new risk and reducing measure. This is mainly because it is impossible to existing risks; prepare for the residual risk, either predict exactly when the next disaster will strike and (iii) physically (preparedness), or (iv) financially how intense it will be. Therefore decision makers (financial protection); and (v) resilient recovery have to trust in statistics that tell them that there is and reconstruction, by building-back-better after a high likelihood that in the next 20 years, a disaster a disaster. will hit. However, with the short term perspective of many politicians or private investors, the immediate However, existing methods of appraising DRM benefits of other investment options can appear investments undervalue the benefits associated with more attractive. Therefore, it is worthwhile to also resilience. This is linked to the common perception consider other more immediate benefits of DRM that – similar to investing in voluntary insurance investments in the second and third dividends. – investing in disaster resilience will only yield benefits once disaster strikes. This leads decision 09 10 2. The Second Dividend of Resilience – unlocking 1.4 Improving the business case economic potential: There is strong evidence that for DRM the mere possibility of a future disaster has real impacts on present-day decisions and economic Understanding all three dividends of resilience growth: The risk of extreme weather events and and incorporating them in planning and decision disasters looms as an ever-present background risk. making is critical for strengthening the business As a consequence, risk-averse households and firms case for DRM investments. It will remain that avoid long-term investments in productive assets, the fundamental principle underpinning DRM entrepreneurship is restricted and planning horizons measures will be to save lives, reduce losses and are shortened, leading to development opportunities promote effective recovery from disasters. However, being lost. presenting evidence of additional dividends to policy-makers and investors can provide a narrative This report presents evidence that DRM measures reconciling short-term and long-term objectives, that reduce this background risk can have immediate thereby improving the acceptability and feasibility of and significant economic benefits to households, DRM investments. the private sector and, more broadly, at the macro- economic level. For instance, there is evidence This report argues that any evaluation of the that reduced background risk and effective risk benefits of DRM investments is incomplete management allow poor households to build up without a full account of all three dividends of savings, invest in productive assets and improve resilience. In practice, the analysis of this ‘triple their livelihoods. More generally, increased dividend’ can be integrated into a variety of resilience enables forward-looking planning, long- different commonly used appraisal tools. Thus, term capital investments and entrepreneurship – this report suggests a framework for conducting even if disasters do not occur for a long time. more complete appraisals of DRM investments. Overall, this will help to show that – in addition to 3. The Third Dividend of Resilience – generating preventing human and economic losses during a development co-benefits: Most DRM investments disaster – DRM investments can actively contribute serve multiple purposes, and are not solely to wealth, wellbeing, profit, growth and sustainable designed to reduce disaster impacts. Strengthened development. river embankments can act as pedestrian walkways, parks or roads; strengthened disaster early warning systems also often strengthen 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 a shelter. Integrating multi-purpose designs into DRM investments can save money. These multiple uses of DRM infrastructure, as well as the associated cost-saving, can be classified as development co-benefits. While the nature of these co-benefits varies significantly, they all materialize even in the absence of a disaster and can therefore strengthen the immediate business case for investing in DRM. Glossary of key terms Avoided losses The immediate and long-run damages and losses (1st Dividend of Resilience) that disaster risk reduction measures can prevent in the event of a disaster. Background risk The possibility of an extreme event (e.g. a disaster) that threatens the prospects of ongoing economic activity. The presence of background risk restricts long-term investments and economic growth, even before a disaster occurs. Co-benefits Co-benefits include development benefits or uses (3rd Dividend of Resilience) of a DRM investment or action, in addition to the primary DRM objective of reducing disaster losses. Development Dividend This is the development potential that is unlocked (2nd Dividend of Resilience) when background risk is reduced through DRM measures. This includes innovation, entrepreneurship, and investments, and is independent of the occurrence of any actual disaster. Disaster Risk Management (DRM) Processes for designing, implementing, and evaluating strategies, policies, and measures to improve the understanding of disaster risk, foster disaster risk reduction and transfer, and promote continuous improvement in disaster preparedness, response, and recovery practices, with the explicit purpose of increasing human security, well-being, quality of life, and sustainable development. (IPCC, 2012) Resilience The ability of a system, community or society exposed to hazards to resist, absorb, accommodate to and recover from the effects of a hazard in a timely and efficient manner, including through the preservation and restoration of its essential basic structures and functions. UNISDR (2009). UNISDR Terminology on Disaster Risk Reduction. UNISDR: Geneva. Risk The combination of the probability of an event and its negative consequences. UNISDR (2009). 11 UNISDR Terminology on Disaster Risk Reduction. UNISDR: Geneva. 12 2. The case for investing in resilience 2.1 Disasters, poverty and The increasing frequency of devastating disasters development is a major obstacle to the reduction of poverty and promotion of shared prosperity. While progress in There is growing awareness that disaster and climate human development has been remarkable in the last risk threatens future growth and development. two decades, with global levels of extreme poverty The total number of disaster events has been likely to fall to under 10% of the global population in increasing since the 1980s, with this trend set to 2015 (World Bank, 2015), gains have not been evenly continue, driven by climate change, population distributed between or within countries (World growth, urbanisation, more people living in coastal Bank, 2013). Without concerted action, by 2030 areas and floodplains, and the degradation or loss there could be up to 325 million extremely poor of natural ecosystems (IPCC, 2012; United Nations people living in the 49 countries most exposed to International Strategy for Disaster Reduction natural hazards and climate extremes, the majority (UNISDR, 2015a). Economic losses from ‘natural’ in South Asia and sub-Saharan Africa (Shepherd disasters are now reaching between $150-$200 et al., 2013). Urban growth will be a particularly billion each year, up from $50 billion in the 1980s strong driver, with the global urban population (see Figure 1), while projected future disaster losses increasing by 1.4 million each week, roughly the in the built environment alone are estimated at $314 size of Stockholm (Global Commission on the billion per year (UNISDR, 2015a). Economy and Climate, 2015). Most of this expansion Figure 1: Disaster and weather-related losses 1980–2013 400 (Billion US$) 300 200 100 0 00 08 04 06 09 03 02 05 07 80 01 10 90 88 84 86 89 98 94 96 99 83 13 82 85 12 92 93 95 87 97 81 11 91 20 20 20 20 20 20 20 20 20 20 20 20 20 20 18 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 Overall losses (in 2013 values)* Weather related losses (in 2013 values)* *Losses adjusted to inflation based on countries CPI Source: Munich Re (2013), cited in GFDRR (2015) is occurring in low- and middle-income countries, visible and immediate, whereas their direct benefits where the growth of informal settlements amplifies and distribution of benefits are unclear, uncertain disaster risk as low-income families are forced to and distant. Existing methods of appraising occupy hazard-prone areas with low land values, investment decisions often fail to incentivise DRM deficient infrastructure, a lack of social protection because they undervalue the resulting benefit and high levels of environmental degradation streams. (UNISDR, 2015a). There are also reasons why individuals choose to stay and invest in risky areas (Hallegatte et al., 2015). Increased exposure to natural hazards may be seen 2.2 Incentivising ex-ante DRM as an unavoidable side-effect from investments to A range of reports have emphasised the need create additional employment and growth from to incentivise and enable greater ex-ante DRM international trade in areas characterised by low (UNISDR, 2015a; World Bank, 2013; IPCC, 2012). transportation costs but exposed to flood risks A range of international policy frameworks echo (Gallup et al., 1998). In China, for instance, the this message, including the Sendai Framework Total Factor Productivity (TFP) is 85% higher in for Disaster Risk Reduction, the Financing coastal regions than inland, and TFP growth is not for Development Framework, the Sustainable significantly different despite higher investment in Development Goals, and the climate change inland regions, suggesting that lower transport costs agreements. All of which highlight the importance offer a permanent productivity advantage in coastal of investing in resilience. However, it still isn’t regions (Fleisher and Chen, 1997). Similarly, poor happening at a rate needed to curb rising disaster people living in flood-prone areas in Mumbai are losses. Although some countries, cities and well aware of the risks and make deliberate decisions communities have made progress, funding is to live where they do to benefit from higher wages, still heavily biased towards ex-post measures. better schools and medical care (Patankar, 2015). Meanwhile, the importance of such ex-ante To counter these problems, this paper examines a prevention is not yet reflected in the much of the shift in the narrative away from a singular focus on policy and practice in governments, aid agencies, losses as a driver for action, towards the recognition communities or businesses (Kellet and Caravani, and appraisal of a broader set of dividends from 2012). investing in DRM. We argue that DRM investment There are many reasons for this underinvestment in should be considered within decision making as disaster resilience. These include a lack of resources something that is good for wealth, wellbeing, profit, in poor countries, a limited understanding of risks growth and sustainable development, in addition and impacts, greater political buy-in for more visible to preventing human and economic losses should post-disaster support initiatives, and the ready a disaster strike. Through the use of the triple availability of international post-disaster assistance dividend concept, we examine evidence of the (Keefer, 2009; Wilkinson, 2012; World Bank, 2013). wider benefits of investing in resilience measures In particular, DRM suffers from a lack of salience with the intention of improving awareness and with citizens, as the benefits are hard to perceive stimulating the development of appraisal tools that (Wilkinson, 2012). Crucially, policy makers tend to can incorporate these factors and enhance future underinvest or not invest at all in projects to manage investments in DRM. risk because the costs of such investments are 13 14 3. The Triple Dividend: a comprehensive business case for resilience Investing in DRM yields a wide range of benefits 1. The First Dividend (‘avoided losses’). Investing in in the short- and long-term: if a disaster does DRM strategies takes the form of reduced losses and strike, then prior planning and investments help damages in the event of a disaster. These losses and reduce human and economic losses. This is the damages can be both direct and indirect, leading to basic rationale and common narrative for disaster both immediate and long-term effects. Most notably, risk management, associated with saving lives, the first dividend includes saved lives, along with reducing losses and supporting both individuals prevented or reduced damage to infrastructure and and communities to quickly and effectively assets. This corresponds to the conventional ex- bounce back from disasters. However, there are post, loss-centric view, and is likely to underestimate a range of resilience dividends (World Resources the benefits of DRM measures (see section 4). Institute (WRI), 2008; Rodin, 2014) associated with 2. The Second Dividend (‘unlocking economic DRM investments. The risk of disasters creates potential’). Even the mere possibility of a future background risk, which constrains investment disaster has real impacts on present-day economic in capital productivity and development for fear growth, particularly in regions or localities of returns being eroded by disaster events. DRM where disaster risks are perceived to be high. enables forward-looking planning, long-term DRM measures help to manage this ever-present capital investments and entrepreneurship. These background risk of potential future disasters. This are all crucial elements for economic growth helps to unlock economic development potential by and shared prosperity. Investments in DRM and enabling forward-looking planning and investment. resilience also generate wider social, economic Increased resilience can catalyse innovation, and environmental co-benefits irrespective of entrepreneurship and investment in productive disasters. These could include multiplier effects on assets – even if disasters do not occur for a long time employment or trade, or strengthening water and (see section 5). sewage systems. Importantly, many investments can be specifically designed to have a dual use, such as 3. The Third Dividend (‘generating development roads that act as embankments or tunnels that can co-benefits’). DRM investments are typically also serve as water retention and drainage systems. associated with economic, social, and environmental As such, determining whether an investment is a uses, or ‘co-benefits’. Co-benefits can play an DRM measure with development co-benefits or a important role in motivating DRM measures and development measure with DRM co-benefits is often determining their design (e.g. shelters doubling as a matter of perspective. community spaces or flood protection infrastructure doubling as roads). While the nature of co-benefits This report argues that a more complete varies significantly, they all materialise even in the understanding of this wide range of benefits – or absence of a disaster (see section 6). dividends – of DRM investments is critical for strengthening the business case for resilience. In particular we propose three concrete dividends from ex-ante DRM measures: The three dividends of resilience are summarised in high ratio supports the business case of investing Figure 2. This report is a first step to bring together in DRM, but it could be further strengthened if evidence that helps to characterise the dividends it captured the full range of dividends associated resulting from DRM investments. These are used to with these investments, such as new flood defenses build the case for an incentive structure for DRM helping to maintain existing and stimulate new that goes beyond avoided losses. investments. For instance, continued investment by companies in the Tabasco region that were The following sections illustrate each of the three otherwise leaving further strengthens the case for dividends of resilience in turn. For example, the avoided losses. Additionally, the second dividend is World Bank and Mexico’s Ministry of Finance evident from reduced background risk encouraging elaborated a joint study to determine the impact of private investment in housing in previously flood- investment in flood defence in terms of reducing prone areas and public investment in improved flood damage in the State of Tabasco between 2007 drainage and electricity networks in areas where and 2010. The first dividend was revealed by the floods had previously deterred such investment cost-benefit ratio of these benefits, which was 4:1, (World Bank 2014a). contributing to avoided damages and losses when floods occurred in 2010 equivalent to $3 billion, or In addition, the capital of Tabasco, Villahermosa, 7% of the GDP of Tabasco (World Bank, 2014a). This has seen improvements in the urban environment as Figure 2: The Triple Dividend of Resilience Investing in resilience reduces losses and damages in the case of a disaster. However, it can also yield development benefits regardless of disasters. Typically, standard disaster risk management investment appraisals fail to account for the 2nd and 3rd dividends of resilience. Disaster risk 1st Dividend of Resilience: Avoided losses Avoiding damages and losses from disasters, by: management Benefits when • Saving lives and reducing people affected (DRM) • Reducing damages to infrastructure and other assets disaster strikes • Reducing losses to economic flows investments 2nd Dividend of Resilience: Unlocking Economic Potential Stimulating economic activity due to reduced disaster risk, by increasing: • Business and capital investment • Household and agricultural productivity • Land value from protective infrastructure • Fiscal stability and access to credit Benefits Regardless of 3rd Dividend of Resilience: Generating disasters Development Co-Benefits DRM investments can serve multiple uses which can be captured as co-benefits such as: Costs and • Eco-system services potential • Transportation uses 15 • Agricultural productivity gains adverse effects of DRM measures 16 a result of federal government investment in flood externalities associated with the flood defence defence. Major DRM investments have stimulated project in Tabasco. Channelling water away from the local actors to take greater care of the environment capital Villahermosa has led to increased flooding while small-scale projects with environmental elsewhere in the state, mainly in rural areas. There benefits have been initiated, including tree planting have also been negative environmental impacts as on riverbanks to prevent landslides, which could a result of these large construction projects. These potentially reveal environmental co-benefits as negative impacts also need to be considered when mentioned under the third dividend. People are weighing up the full range of costs and benefits beginning to dispose of litter more responsibly, associated with a particular DRM investment. throwing less on the streets or into drains, helping The triple dividend framework presented here avoid blockages during rainy season (Vorhies and helps to inform more comprehensive cost-benefit Wilkinson, forthcoming 2015). calculations. This example also demonstrates the need to examine the possible negative consequences, which could be considered negative co-benefits associated with a comprehensive assessment. For example, a report by the Colegio de la Frontera Sur Cyclone shelter and medical camp, Bangladesh suggests there are a number of unintended negative 4. The First Dividend of Resilience: saving lives and avoiding losses Saving lives and avoiding losses (First Dividend of Resilience) DRM measures can avoid or reduce losses and damages (both immediate and long-run) in the event of a disaster. These include: • saving lives and reducing numbers of people affected • reducing direct damages to infrastructure and other assets • reducing economic and non-monetary losses (direct and indirect). The triple dividend of resilience approach outlined While comparisons across countries and events are earlier is motivated by the observation that fully difficult due to contextual differences, it is possible acknowledging the benefits of resilience will to infer levels of preparedness and effectiveness strengthen the business case for DRM investments. of DRM measures through observing the impacts However, while other benefits of DRM can play of similar hazards (see Figure 3). In 2010, the substantial roles, the primary objective of DRM existence and enforcement of building codes helped remains clear: to save lives, while also reducing limit earthquake damage in Chile, with less than loss and damage to people and their assets. In 1000 people killed, despite a magnitude 500 times recognition of the importance of this objective, this greater than the Haiti quake of the same year that section briefly highlights the evidence for effective killed over 230,000 (Lovett, 2010). More recently, risk management that limits human and economic increased investment in infrastructure and disaster disaster losses. preparedness paid off in the latest earthquake and tsunami in September 2015 in Chile, which resulted in relatively low casualties, despite a 8.2 magnitude 4.1 Saving lives and reducing (UNISDR, 2015b). Volcano-related mortality has people affected also decreased significantly as a result of volcano monitoring, assessments and EWS; and, although Effective disaster risk management policies and not all volcanoes are monitored, it is estimated that actions are often measured by their ability to save such measures have saved about 50,000 lives over lives and reduce the number of people affected by the last century (Auker et al., 2013). disasters. To this effect, progress in saving lives has been marked. As reported in the 2015 Global DRM interventions can also save lives through Assessment Report, ‘improvements in disaster acknowledging different people’s needs, management have led to dramatic reductions in vulnerabilities and capacities. Integrating indigenous mortality in some countries’ (UNISDR, 2015a). In knowledge into DRM initiatives has been shown Bangladesh, deaths from cyclones have been reduced to help avoid loss of life. For example, oral history considerably, due to a combination of strengthened on ocean and buffalo behaviour meant that the coastal defences, cyclone shelters and early warning inhabitants of Simeulue Island in Indonesia had early warning before the Indian Ocean tsunami in 17 systems (EWS). 18 2004 and were able to retreat to the hills. As a result, Infrastructure, early warning systems and planning only seven out of 78,000 people died from the are three areas where DRM investments have tsunami, despite the island being located just 40 km been critical in reducing losses from disasters. from the epicentre of the earthquake (Lovell and le Infrastructure losses have particularly profound Masson, 2014). consequences for development progress. Between 2015 and 2030, approximately $90 trillion is expected to be invested globally in infrastructure to 4.2 Reducing damages and losses meet the world’s urban, land use and energy needs (Global Commission on the Economy and Climate, There is a strong body of evidence for the 2014). This is particularly pertinent in Asia and effectiveness of DRM measures gathered from Africa, where 90% of urban growth is expected to projects around the world. The GAR 2015 concludes take place between now and 2050, which will result that ‘annual global investment of US$6 billion in in accompanying infrastructure needs (United appropriate disaster risk management strategies Nations Department of Economic and Social Affairs would generate total benefits in terms of risk (UNDESA), 2014). It is crucial that these huge reduction of US$360 billion. This is equivalent to financial investments are disaster-resilient, as this an annual reduction of new and additional average will protect lives and secure development progress. annual loss by more than 20 percent’ (UNISDR 2015a). Mechler and Bouwer (2014) make the case Infrastructure losses often go well beyond physical that, despite the increase in risk exposure, various damage. Business losses can be the consequence of DRM strategies have decreased vulnerabilities ‘ripple effects’ as the impact of shocks propagate throughout the world. both upstream (backward) from clients to suppliers Figure 3: Reduced cyclone mortality in Bangladesh and Odisha, India Bangladesh State of Odisha, India Cyclone Bhola Cyclone Gorky Cyclone Bhola Cyclone 05B Cyclone Phailin (category 3) (category 4) (category 5) (category 5) (category 5) 300,000 people killed 138,866 people killed 9,843 people killed 4,234 people killed 47 people killed 1970 1991 2007 1999 2013 Source: Munich Re (2014), in GFDRR (2015) Table 1: Damage reduction due to early warning of different lead times Damage Lead Actions taken to reduce Item reduction time damages (%) and downstream (forward) from suppliers to clients. Removal of some household The 2011 Thai floods impact on global supply Household items 24 hrs 20 items chains forced Toyota to slow down production in Removal of additional factories in Indonesia, Japan, Malaysia, Pakistan, 48 hrs 80 possessions the Philippines, South Africa, Vietnam and North Removal of all possible America. Locating industrial parks in protected areas Up to 7 90 possessions including stored less prone to flooding would have improved disaster days crops resilience and reduced losses (SCOR SE, 2013). Livestock 24 hrs 10 Poultry moved to safety Similarly, the Tohoku-Pacific earthquake in Japan in March 2011 reduced domestic industrial production Poultry, farm animals moved to 48 hours 40 safety and the exports of goods used as inputs in the auto industry, leading to a reported cut in production at Up to 7 45 Poultry, farm animals, forages, days straw moved to safety Toyota’s Indian subsidiary by up to 70% between 25 April and 4 June (The Economic Times, 2011). Agricultural implements and Agriculture 24 hrs 10 equipment removed Early warning systems are frequently cited for their Nurseries, seed beds saved, 50% role in reducing economic losses of disasters by of crop harvested, agricultural 48 hours 30 triggering other important prevention actions, as implements and there is more lead time to protect assets. While the equipment removed evidence base is complicated by issues of attribution Nurseries, seed beds saved, and lack of widespread cost benefit calculations fruit trees harvested, 100% of Up to 7 (Rogers and Tsirkunov, 2011), table 1 suggests days 70 crop harvested, agricultural implements and significant loss and damage reduction possible due to equipment removed an early warning of different lead times on a number of different movable assets (Subbiah et al., 2008). Some fish, shrimps, Fisheries 24 hrs 30 prawns harvested Establishing and enforcing risk-informed, locally- Some fish, shrimps, prawns 48 hours 40 appropriate standards and codes for new buildings harvested, nets erected and other infrastructure reduces the risk of damage All fish, shrimps, prawns Up to 7 to structures in the event of a disaster. Existing 70 harvested, nets erected, days infrastructure can also be retrofitted to adhere to equipment removed building standards. For example, houses in Tonga Fishing net, Open sea fishing 24 hrs 10 constructed to cyclone standards in the early 1980s boat damage avoided were significantly less impacted by Cyclone Ian Fishing nets removed, boat 15 in 2014 than many newer houses that were not damage avoided built in compliance with the standard. These were Money, some office completely destroyed or severely damaged (GFDRR, School or office 24 hrs 5 equipment saved 2014). Similarly, homes built with typhoon-resistant Money, most office features as part of the Storm Resistant Housing for 48 hours 10 equipment saved a Resilient Da Nang City project in Vietnam showed Up to 7 Money, all office equipment, no damage when Typhoon Nari hit in October 2013 15 days including furniture protected (Tran, 2013). Source: Subbiah et al., (2008). 19 20 A World Bank study of earthquake vulnerability in The examples above suggest that the avoidance of Colombia (Ghesquiere et al., 2006) assessed a range loss usually provides a critically important stream of measures that were: of benefits for DRM investments. Widening avoided loss calculations beyond immediate asset losses • structural (retrofitting and reinforcement of to include the impact of disasters on the wider public buildings, such as schools, hospitals, fire economy and society can help strengthen the case stations and administrative buildings) for investing in DRM. Nevertheless, the potential • non-structural (the resettlement of vulnerable incentivising role is limited by several factors. First, populations in high-risk areas) these wider benefits are hard to identify, calculate and attribute. This is because these benefits rely on • functional (protection of people and assets, counter-factual reasoning, in that a DRM investment so that they remain functional during and will reduce the probability of a disaster happening. It immediately after an emergency). is difficult to measure the impact of something not happening. Second, the benefits may not be enjoyed A probabilistic cost-benefit analysis helped by the same parties facing the costs of investment, demonstrate to decision-makers the significant although this may not be a problem for governments reductions in probable maximum loss (PML) of a concerned with wider economic and social goods. 1 in 1000 year earthquake event, before and after However, the most critical point to consider here, structural investments were made (shown below in from the perspective of this paper, is that using loss- Figure 4). The average annual returns on mitigation based approaches to justify investment is reliant investments for schools, hospitals and fire stations on the occurrence of a disaster event in the future, were estimated to be as high as 19% for structural which is a major flaw. By identifying the dividends of investments and 32% for structural and functional resilience that are delivered even in the absence of investments. In addition to the direct costs of disaster events, and incorporating them in decision structural and functional assets, there may be making, the case for investing in resilience can be significant indirect losses. One example of this would greatly improved. be the way disruption to education can constrain future career options and prosperity later in life. Figure 4: Probable Maximum Loss (PML) of a 1 in 1000 year earthquake event, before and after structural investments 35 PML (percent) Unretrofitted 30 Retrofitted 25 20 15 10 5 0 Schools Fire stations Hospitals Other public buidings Source: Ghesquiere et al. (2006) 5. The Second Dividend of Resilience: unlocking economic potential Unlocking economic potential (Second Dividend) DRM measures that reduce the background risk due to potential future disasters can have immediate and significant development benefits. Increased resilience enables forward-looking planning, long-term capital investments and entrepreneurship, even if disasters do not occur for a long time. These benefits include: • economic gains from positive risk taking (e.g. entrepreneurship and innovation) • investments in productive assets (e.g. in small-scale agriculture) • extending planning horizons (e.g. for building up savings) • increase in land values after DRM investment. In disaster-prone places, risks of extreme weather 5.1 Increased business and events and disasters create an ever-present capital investment background risk. As a consequence, risk-averse households and firms avoid long-term investments Without effective instruments for managing disaster in productive assets, entrepreneurship is restricted risks and the adverse consequences of disasters, and planning horizons are shortened, meaning investment decisions are likely to be excessively risk development opportunities are lost. By reducing this averse (Elbers et al., 2007; Gollier and Pratt, 1996). background risk, or by helping households and firms As a result, businesses refrain from engaging in to manage it effectively, DRM measures can have entrepreneurial activities and innovation or making immediate and significant economic benefits. long-term investments in productive assets. This section presents evidence that investments in One of the most immediate benefits that investing ex-ante DRM can unlock economic opportunities in DRM has to offer the private sector relates for households, government and the private sector to investment risk-taking. Taking positive risks, and, more broadly, at the macro-economic level. For engaging in entrepreneurial activities, and example, the evidence from poor rural households investing in productive assets and innovation dependent on agricultural income suggests that are the drivers of job creation, rising incomes, strengthening ex-ante DRM enables households greater productivity and overall economic growth. to increase savings and investment in productive However, the perceived risk of future disasters assets, thereby improving their productivity and can lead to greater risk aversion, which dampens livelihoods. Further examples show how DRM entrepreneurial activity (Rose, 2015). Investing measures can increase land values, as well as in DRM can help reduce this background risk and improve credit access, fiscal management and public provide better information on residual risk, which sector coordination. Overall, increased resilience in turn helps promote the entrepreneurship and can be argued to be a catalyst for positive risk taking investment needed for economic growth and job such as capital investments, entrepreneurship and creation. While risk-taking can increase welfare, innovation, along with forward-looking planning. there may be a trade-off between exposure to natural hazards and productivity or economic 21 22 growth in high disaster risk situations. Public and Firms may also benefit from improvements to private investment in improved risk management their image and credit ratings, through increased can mitigate this trade-off, reducing the background stability (Rose, 2015). There is some evidence risk that prevents people from investing, therefore of businesses taking this ‘good citizen’ image improving productivity and accelerating growth seriously; for example, in a set of six case studies (Hallegatte 2014). of companies describing their activities related to managing the physical impacts of extreme weather Similarly, disaster insurance can encourage the and climate change, most saw avoidance of disaster kind of ‘positive risk taking’ that is arguably impacts (both now and in the future) as only part fundamental to the development process, making of the logic for investing in resilience (Crawford investments more secure and therefore fostering and Seidel, 2013). Companies such as American business innovation and growth (Hallegatte et al., Water, The Hartford, National Grid and Rio Tinto 2015). However, disaster insurance may also lead to all emphasised that fulfilling, or staying ahead moral hazards if it is not designed with the correct of, regulatory and disclosure requirements and control measures in place. This points to a potential new government policy are key business drivers counter effect of using insurance, where it can for investing in resilience. A survey of European create a false sense of security, increase vulnerability companies also revealed that investing in resilience to exceptional events or encourage inappropriate can help develop market opportunities, with 43% development in high-risk areas (Surminski 2014). of the companies surveyed anticipating increased Investing in DRM can generate benefits that extend demand for existing products/services (Carbon across sectors to the macroeconomic level. A region Disclosure Project (CDP), 2015). or country-wide boost to productive investments can boost the overall development of a country. 5.2 Household and agricultural Protecting coastal regions, towns, business districts productivity dividends or ports from flood can foster economic activity, long-term planning and capital investments. This is When levels of background risk are high, evidence because, where well designed and maintained, large suggests that households lacking effective risk DRM infrastructure investments (such as dikes) can management tools will tend to spread their overall protect not only large firms themselves, but also risk. Rather than specialising, households tend to their workers and suppliers, along with their social engage in a wider range of lower risk activities, and logistic infrastructure. If DRM investments thereby reducing returns to assets and investments enable firms and their stakeholders to make (Hallegatte et al., 2015). For example, there is long-term capital investments, engage in trade and evidence that rural households avoid focusing solely thus promote business development, the entire on agriculture and instead diversify occupations area benefits collectively (World Bank, 2013; within households as a risk management measure Hallegatte, 2014). – with negative impacts on long-term welfare (Rentschler, 2013). While such actions reduce the risk of severe losses, they obstruct growth and incentives to invest (Dercon, 2005; Carter and Barrett, 2006). An illustration of this effect can be provided in an Table 2: Land-value Gains and Infrastructure Costs in Recife, Brazil agricultural context in Zimbabwe. Here, farmers Increase in land value exposed to risk exhibit a mean capital stock that ($ per square meter) is half as large as for farmers who are not exposed. by distance to centre Of this reduction in capital, ex-ante risk accounts for two thirds of the difference; hence, most of Ratio of gain in the welfare impact of risk comes through reduced Service 5–10 km 15–20 km 25–30 km land value to investment cost investments and risk-taking, not damage and loss when a disaster occurs (Elbers et al., 2007; Water supply 11.1 5.1 3.2 1.02 Hallegatte et al. 2015). Extending these findings into Road pavement 9.1 4.8 3.4 2.58 other decision making contexts and sectors could Wastewater removal 8.5 1.8 0.3 3.03 provide crucial evidence to enhance the incentives for ex-ante investments in DRM. Source: Peterson, (2009) Household insurance and social safety net programmes have been observed to stimulate enabled farmers to overcome credit constraints and savings, investment in productive assets and mitigated previously chronic underinvestment in increases in agricultural productivity in a tools and fertiliser. As a result, farmers have been number of different countries, with subsequent able to increase their agricultural productivity, with improvements in income levels. In Ethiopia, the an average 6% increase in maize yields. Evidence R4 Rural Resilience Initiative (previously HARITA) also shows that insured farmers invest in riskier and programme is providing risk management support, higher-yielding cultivation methods, with higher including weather-indexed insurance to small-scale overall planting-stage investments than uninsured and subsistence farmers. Premiums are largely peers, enabling them to reconcile entrepreneurial paid through labour to support risk management investment decisions with effective risk activities. In the event that rainfall drops below a management (Dar et al., 2013; Emerick et al., 2015). predetermined threshold during the growing season, Overall, these evaluations demonstrate how insurance payments are automatically triggered. effective risk management tools not only yield An evaluation of the programme has found that significant benefits in the aftermath of a disaster, insurance is enabling farmers to increase their but can also yield significant benefits even if savings, which can act as an important reserve in the disasters do not strike for many years, such as case of contingencies. Moreover, insured farmers through increases in productivity and income have been found to increase their investments levels. By reducing background risk, DRM measures in productive assets, in particular oxen, but also can directly influence economic decisions and fertiliser, improved seeds and compost – thus behaviour, actively contributing to a long-term improving their overall productivity (Madajewisz et sustainable economic development process. If al., 2013; Greatrex et al., 2015). implemented at sufficient scale, DRM measures Evaluations of the Mexico government’s CADENA (such as weather indexed insurance programmes) programme show how weather indexed insurance can have significant economic development benefits not only helps to compensate for drought losses, at the macro-level, and even be cost-effective in the but also directly increases the productivity of absence of disasters. small-scale farmers. The insurance programme has 23 24 5.3 Land value dividends from 5.4 Fiscal stability and future protective infrastructure credit risks Investment in dams, levees and other structures There are a number of economic and other benefits to protect assets from disaster impacts can of DRM to be recognised and realised by those unlock economic potential through increases in in charge of fiscal policy decisions. Approaches productive investment and consequent increases organised around the protection of the balance in the value of land. To some extent, the efficiency sheet using risk financing instruments have seen of infrastructure provision can be measured by growing emphasis in disaster-prone countries in the relationship between land-value capitalisation recent years (Mechler et al., 2015). The inclusion and infrastructure costs. When the benefits of disaster risk in these instruments and shock- of capitalised land values exceed the costs of financing mechanisms can have a significant impact installing infrastructure, infrastructure is generally on reducing uncertainty, potentially unlocking undersupplied. This relationship can be seen in higher private investment, employment and growth Table 2, which demonstrates land-value gains and (Griffith-Jones and Tanner, 2015). Implementing a infrastructure costs in Recife, Brazil. In this case, structured process for risk detection in the balance there is clearly a need for more investment in road sheet can potentially provide a ‘price signal’ while, pavement and wastewater removal in order to meet in contrast, a focus on ex-post disaster management economic demand, as the land-value gains exceed offers little in the way of risk awareness or the costs of infrastructure supply. This is in contrast stimulating risk reduction (Phaup and Kirschner, to the water supply, which has an almost equal land- 2010). This is the case in Mexico, where innovative value capitalisation to investment cost ratio of 1:1 financing arrangements have been initiated under (Peterson, 2009). FONDEN incentivise investment, to ‘build back better’ and relocate housing to lower-risk areas In a similar way, protective infrastructure can also (Hoflinger et al. 2012). generate dividends of resilience. Hard infrastructure for protection, along with soft DRM measures, One example of a strategic DRM response that such as monitoring and early warning, can protect incorporates the ‘triple dividend’ concept is the assets from disaster impacts. These factors are fiscal risk matrix. Such matrices combine the likely to have a positive effect on land prices, which assessment of many different contingent risks, also shows an increased willingness for people to including their interaction with disaster risk, and invest in these areas, given a reduced background their use has grown from insights gained during risk. These increased land values can in turn help recent financial and fiscal crises (Mechler et al., to raise government revenue, helping to finance 2015). Fiscal risks are ‘stress-tested’ through the cost of ex-ante DRM measures. It is possible sensitivity tests on baseline macro and fiscal to learn from building development projects, indicators. There is also a growing understanding where one of the most common strategies for of the need to take a systematic perspective for recovering infrastructure costs involves the sale understanding the potential for complex and of land with enhanced value. Here, it can be seen interrelated shocks, leading to a multi-risk approach that the business case for protective infrastructure (World Economic Forum (WEF), 2015). Disaster investments can be more accurately costed in this risk has come to be considered a key threat; in way, particularly where the public sector owns the a recent survey regarding relevant fiscal risks in land. OECD countries, disasters emerged as an important concern (Kopits, 2014). In the future, the benefits of lower background enable capital investment may therefore provide Ram Kumari Tharu, 33, heads risk may also be reflected in businesses and a component of the development dividend for out to a local collection center with her morning cucumber governments’ access to affordable credit. Noting firms, with ratings agencies now calling for greater harvest. the growing influence of climate change on risks, disclosure of firms’ exposure to extreme natural Standard and Poor’s suggest climate change hazards, which should encourage them to bolster could feed through to sovereign creditworthiness their resilience to these events and aid transparency through economic, fiscal and external performance (Standard & Poor’s Rating Services, 2015). (Standard & Poor’s Rating Services, 2014). Credit rating agencies have also recognised that companies’ credit profiles may be determined to a larger degree in the future by climate-related disasters and the increased exposure of companies and their global supply chains to risk (Standard & Poor’s Rating Services, 2015; Moody’s, 2015). In some cases, credit rating agencies have explicitly called for DRM strategies to both prevent disaster losses and maintain credit ratings, illustrated in coastal cities in south-eastern Virginia’s Hampton Roads region of the USA (Moody’s 2015). Access to credit to 25 26 6. The Third Dividend of Resilience: Co-benefits of DRM investments Generating development co-benefits (Third Dividend of Resilience) DRM investments have multiple uses and can be classified as economic, social and environmental co-benefits. These co-benefits may either be explicitly designed into the investment (such as dual-use infrastructure) or incidental. While the nature of co-benefits varies significantly, they all materialise even in the absence of a disaster. Co-benefits can play an important role in motivating DRM measures and determining their design. Multi-purpose design that intentionally integrates these co-benefits can save money and significantly improve the attractiveness of investing in DRM. These co-benefits include: • economic co-benefits, (e.g. flood protection supporting fisheries) • social co-benefits, (e.g. improved transparency or social cohesion) • environmental co-benefits (e.g. watershed protection). Table 3: The range of co-benefits associated with DRM measures To gain a complete picture of the benefits of DRM investments, their social, environmental and DRM activity Possible co-benefits economic contexts must be taken into account. Provision of irrigation or potable water and This makes it evident that DRM measures can Flood protection structures hydro-electric power. yield a variety of co-benefits. These can materialise Dual-purpose road infrastructure even in the absence of a disaster, but – unlike Improved governance, more organised social Strengthening DRM capacity of civil society the second dividend of resilience – are not due structures to reduced background risk. In line with growing Environmental conservation, improved air efforts to highlight the co-benefits of climate change Eco-system based DRM approaches quality, climate change mitigation mitigation, it is critical for decision makers to fully Shelters Community facilities (e.g. clinics or schools) in understand and account for the co-benefits of DRM non-disaster periods and climate change adaptation measures (Vorhies Improving water supply systems in rural Water supply systems improved regardless of and Wilkinson, 2015; Kok et al., 2008; Santucci, 2015; areas a disaster occurring Global Commission on the Economy and Climate, Improved irrigation practices, possibly 2014). As emphasised in section 4, it is important Construction and use of drainage pipes, improved agricultural practices. that the design of DRM measures must also fully canals and water retention basins Dual purpose road tunnel or parking lot consider and mitigate the potential negative side- infrastructure effects of DRM measures (such as the costs of Improved women’s involvement in relocation of communities from risky areas). Community-based disaster preparedness community level activities Installing more resilient wireless Enhanced access to telephony and electronic communications data services Training farmers to diversify the use of crops Reduced vulnerability to poverty Improvement to the food supply chain, Better monitoring of food supplies possibly making it more cost-effective Source: Adapted from Environmental Resources Management and Department for International Development (ERM), 2005 This section presents evidence of the positive side- 6.1 Ecosystem-based co-benefits effects, or co-benefits, of DRM measures. Some of these might be unintentional and generated as Ecosystem-based approaches to DRM and climate ‘spill-over’ effects. However, the examples below adaptation provide a good illustration of co-benefits also demonstrate the diverse synergies that can from investing in resilience. These have gained be created by intentionally designing measures to popularity in recent years emphasising how good deliver both DRM and development objectives. stewardship of environmental systems can help Conversely, linking with DRM goals can also help reduce and adapt to disaster risks, in turn saving to deliver other benefits that might otherwise be lives and reducing loss and damage. At the same undersupplied, such as public space or improved time, ecosystem protection can generate wider transport networks. social and environmental co-benefits, even in the absence of disaster events. These include: Multi-use design is becoming increasingly common in physical DRM infrastructure, where high upfront • biodiversity conservation costs might otherwise make the investments harder • carbon sequestration and mitigation to justify. Cyclone shelters in Bangladesh have a long history of multi-purpose design for use outside • land erosion and degradation prevention storm times (Khan, 2008). In Tinputz District, Papua New Guinea, resilient infrastructure for • habitat creation and restoration education and health is designed both as a space • mitigation of microclimate variability. for communal gatherings and safe shelters for the community if disaster does strike (Tinputz District Social co-benefits include: Disaster Risk Management Committee, 2014). • improved and secure livelihoods Table 5 presents examples of the breadth of these • social cohesion and community co-benefits, illustrating how widely they can vary in practice. Some co-benefits can be directly observed, • new or preserved recreation areas measured and quantified, such as livelihood benefits or dual purpose infrastructure, while others, such • better quality land for agriculture/livestock as social cohesion, can be very hard to quantify • better water security. and integrate in economic analyses, despite being potentially significant. Below, we outline three areas Aside from economic damages, these approaches where DRM activities are delivering co-benefits: have been shown to help develop new or improved ecosystem-based approaches, transport systems, and income, profits or savings, when compared to agricultural projects. alternative DRM or climate adaptation approaches (Doswald et al., 2014). The services delivered by ecosystems can therefore deliver, not only disaster risk reduction benefits such as flood regulation and protection from storm-surge protection, but also enhance food security, provide sustainable water supplies or enhance livelihoods through increasing resource-use options or tourism (Jones et al. 2012). 27 28 A Vietnam mangrove plantation and DRM project Such multi-purpose water management approaches in the typhoon and flood prone coastal provinces can therefore be designed to provide livelihood, of northern Vietnam has proven to have significant environment, aesthetic or recreational co-benefits environmental co-benefits (IFRC, 2012). The alongside disaster resilience. The Netherlands benefits of this multi-purpose DRM project include: ‘Room for the river’ is being designed to manage carbon sequestration, nutrient retention, sediment higher water levels, giving the country’s rivers more retention, biodiversity habitat, flood attenuation, space to flood safely. The measures also attempt to wastewater treatment, and water supply and improve the quality of the immediate surroundings, recharge. The 17-year-long project cost $8.88 million such as providing new river islands. While in some to set up and has involved the creation of 9,462ha cases such co-benefits can be assumed to represent of forest (8,961 ha of mangroves) in 166 communes good project design and implementation, they are and the ‘protection of approximately 100km of dyke not always costed into the business cases that justify lines’. The project aims to reach approximately the financing decisions. 350,000 beneficiaries directly and two million Similarly, the World Bank’s flood management indirectly. There has been an ‘increase in per hectare programme in Sri Lanka’s capital Colombo yield of aqua culture products such as shells and demonstrates the wider value of wetland protection oyster by 209-789 per cent’. Economic benefits from and restoration beyond just flood defence. Whilst aqua product collection and honeybee farming are performing a valuable role in reducing flood risks, found to be between $344,000 and $6.7 million in the wetlands of the Colombo basin serve a range the selected communes. Environmental benefits of other purposes. They provide livelihoods and include $218 million alone generated as an estimated economic security to local residents through minimum of CO2 emissions absorbed by the planted fishing and rice cultivation, while also serving as groves (assuming a price of $20/t CO2e). man­ Table 4: Summary of floodgate rehabilitation activities (Source: World Bank, 2012) estimated Estimated Estimated estimated Benefit Area Flood Total Required Works Financial Economic Fish Benefit (Ha) Protection Benefit ($) Cost ($) Cost ($) ($) Benefit ($) Rehabilitation of the mechanical Huay Pin works (gates), minor structural 72,000 68,400 120 12,375 3,600 15,975 repairs to the headworks Rehabilitation of the mechanical Huay Kae works (gates), minor structural 52,500 49,875 100 10,313 3,600 13,913 repairs to the headworks Rehabilitation of the mechanical Huay Pa Pak works (gates), minor structural 35,000 33,250 100 10,313 3,600 13,913 repairs to the headworks Rehabilitation of the mechanical Huay Bung Or works (gates), resectioning of the 31,875 30,281 150 15,469 3,600 19,069 canal (2.5 km) Rehabilitation of the mechanical Huay Daeng works (gates), resectioning of the 38,250 36,338 170 17,531 3,600 21,131 canal (3.0 km) Total 218,144 640 66,000 18,000 84,000 Source: Adapted from Environmental Resources Management and Department for International Development (ERM), 2005 Figure 5: SMART Tunnel design in Malaysia Investing in resilience reduces losses and damages in the case of a disaster. However, it can also yield development benefits regardless of disasters. Typically, standard disaster risk management investment appraisals fail to account for the 2nd and 3rd dividends of resilience. Holding pond 1. No storm, low rainfall Storage reservoir Holding pond 2. Moderate storm Storage reservoir Holding pond 3. Major storm Storage reservoir Bypass tunnel a park area for tourism and recreation, and the 6.2 Transport co-benefits wetlands and surrounding areas are on average 10 degrees celsius cooler than non-pervious areas DRM investments can also be linked with transport (such as parking zones or on the streets) at the systems to combine objectives and improve hottest time of the day. This results in energy efficiency. Flood embankments are often used not savings for buildings and homes using artificial only to protect the landward assets from inundation cooling systems. Other wetland co-benefits but also to support road networks. In doing so, the include waste water treatment, maintenance of roads themselves are also more resilient to flood freshwater supplies, carbon sequestration, climate impacts and can permit movement after major regulation, water regulation, soil erosion regulation, hazard events. These synergies can operate at a pollination, recreation and nutrient cycling. variety of scales: Levees in Bangladesh commonly Economic analyses of selected wetland co-benefits, support small-scale tracks for rickshaws and including flood protection, carbon sequestration, motorcycles, whilst the 11 dams that protect St climate regulation through reduced use of air Petersburg in Russia against storm surges are built conditioning near wetland areas and waste water to support 25.4 km of six-lane highway. treatment, along with potential income from The Smart Tunnel scheme in Kuala Lumpur recreational activities, could be worth between $113 combines storm water flood drainage with vehicle to $127 million annually (World Bank, 2015). tunnels under the city (see Figure 5). For Category 2 storms, which occur about ten times each year, part of the flood waters are diverted through the lower 29 30 section of the road tunnel. For Category 3 storms, well as less risks to boats related to storms, fisheries which occur once or twice a year, traffic is prohibited business now have more adequate infrastructure, and a large part of the flood flow is diverted through electricity, water, transportation and other logistics the tunnel. A flood detection system provides services for their activity (World Bank, 2014b). adequate warning time to evacuate traffic and The World Bank Mekong Integrated Water operate tunnel floodgates as well as to minimize the Resources Management Project has produced a cost of traffic disruption (Seang, 2009). number of economic co-benefits. Estimates of these are based on the assumption that they would be fully reached in three years and that the economic 6.3 Agricultural co-benefits life of the investment would be 15 years. The project The development of safe sea port shelters as part was designed with water resource management and of the Natural Disaster Risk Management Project in flood plain management at its core and resulted in Vietnam were planned to support the sustainable the rehabilitation of 10 floodgates in the Xebangfai development of the fishing industry. The facilities River and about 40 village irrigation schemes being are highly effective in preventing storms damages put in place in the Xebangfai and Xebanghieng rivers for the fishery boats, but also provide a centre for of Lao PDR. the development of fisheries logistic services. As Man scattering rice grains. Sta. Cruz, Laguna, Philippines Box 1: Key co-benefits of integrated DRM investments in Jamaican agriculture include: Economic co-benefits • DRM irrigation projects helped reduce the economic impacts of droughts, particularly in Southern Clarendon and St.Elizabeth. These farming communities have also benefited from increased productivity and output relative to other areas, even in the face of drought over the April-June quarter in 2014. Social co-benefits • Training and shared learning on drip irrigation has strengthened social capital and built comradeship within the communities, especially among the farmers in the field. Environmental co-benefits • A rainwater catchment tank and drip irrigation system in Lititz, St. Elizabeth, has improved small-scale irrigation, resulting in higher yields, less soil erosion and deforestation, and an increase in socioeconomic status for farmers. Sources: Interviews with Ministry of Agriculture and Development Bank of Jamaica; Planning institute of Jamaica (2007); United Nations Development Programme (UNDP) Jamaica (2012) The floodgate rehabilitation increased flood (JaREEACH), which aims to strengthen local protection (avoiding losses associated with the and national institutional capacity to support first dividend of resilience) for 640ha of cultivated climate change adaptation and DRM within areas, and, on average, $13,200 of flood protection agriculture. The Planning Institute of Jamaica also benefits per gate. In addition, co-benefits (the third committed $9.9 million to the development and dividend of resilience) included increased fish catch implementation of adaptation measures, focussing in the floodplain, with the average annual benefit on strengthening agricultural productivity, coastal of the increased fish catch estimated at $3,600 per protection and building local capacity for natural gate, not only because of reduced flooding, but also resource management. due to enhanced water regulation throughout the Of these investments, those that have focussed year (see Table 4). Increases in water use efficiency on reducing drought risk in farming seem to offer also produced co-benefits in the form of decreased particularly high potential for co-benefits. The electricity costs of $2/ha (World Bank, 2012). installation of dedicated irrigation systems to In Jamaica, the agricultural sector contributes overcome the impact of drought has helped farmers about 6% of GDP and employs 17-18% of the labour to increase their productivity and output, as well as force. Domestic agriculture is largely located on reduce soil erosion and deforestation by optimising hillside plots, with an average size of one acre with previously inefficient farming practices (see Box 1). slopes above 15 degrees; meanwhile, the export agriculture (including coffee, banana, cacao and coconut) contributes to 22% of total exports, raising $274 million in foreign exchange each year. A number of DRM programmes have focussed on this sector, including the Jamaica Rural Economy and Ecosystems Adapted for Climate Change 31 32 7. Recommendations for decision-makers: Integrating the Triple Dividend of Resilience in DRM appraisals Realising the triple dividend of resilience involves assessment. By way of a conclusion, the following a strategic shift, offering a different perspective steps indicate some relevant guidance for decision- on how investments can support policies and makers to move towards the triple dividend of objectives beyond DRM. The approach offers an resilience perspective (Garrido, 2015). enhanced understanding of the broader economic, social and environmental implications of investing in DRM activities. While loss data, risk models and 7.1 Define the problem and appraisal tools are the key means for investment its context decision making, the overarching foundation of the triple dividend of resilience concept is a more A practical starting point for decision makers is a holistic strategy that links DRM, climate and other mapping exercise to understand development goals, development policy objectives. DRM is not seen as threats and risk drivers. an objective in its own right – it is considered as an • What are the contextual development goals set by important lever for strategic risk management of a certain country, city, locality or village? overall development progress that reduces avoided losses and yields benefits from taking risks. • What are the threats to, and drivers of, development? This approach starts with thinking through development strategies and the inherent dynamics • What DRM measures are proposed and how do of economic development. It then requires the they relate to these goals, threats and drivers? stress testing of these strategies, based on a range of possible climate futures and the principles of • Who are main beneficiaries? To what extent are avoiding locking-in development paths that are, or individuals, groups, sectors or activities better may become, unsustainable under climate change. protected because of DRM? In practical terms, when making development and DRM plans, policy-makers should resist the 7.2 Identify and apply tools and temptation (and analytical convenience) of relying methods for empirical analysis on a single set of parameters for analysing risks, of DRM costs and benefits. The characteristics of risk are often context specific and the requirements for Ideally, a DRM proponent should strive to select assessment differ between local or national scales.. a set of approaches that can generate quantitative Similarly, for hazards with a high probability of measures or shed light on each of the three types recurrence, the measurement of benefit and cost of dividends of resilience. It is unlikely that a calculations may prove less problematic than for single approach can yield answers to every single hazards with low and uncertain probabilities (such benefit stream linked to DRM. A more complete as earthquakes). We therefore suggest applying evaluation requires the use of various qualitative multiple approaches and not to rely on a single and quantitative assessment tools. The application of multiple approaches rather than reliance on • Appropriate strategies should focus on one tool or method is recommended, especially supporting development paths that are robust to in data constrained environments, where flexible a range of possible climate and socio-economic approaches are needed. futures. Recognising the need to integrate DRM into future development pathways, to • Conducting a probabilistic assessment rather curb the rise of disaster losses, constitutes an than relying only on historic loss figures can important step towards achieving sustainable yield clearer understanding of the first dividend development objectives. (saving lives and avoiding losses). • Devise strategies for communicating the dividend • The biggest gap in triple dividend knowledge concept: This includes communicating how is in understanding how reducing background DRM interventions are linked, or can be delivered risk can help to unlock and stimulate economic through, other development interventions; what activity. Using simple proxies to measure the are the benefits from DRM under triple dividend second dividend of resilience may be necessary. principles and are they robust under different Anticipated land-value increase could be used as climate and development futures?; what is a good estimate of increased economic activity the value of DRM interventions relative to ‘do in a given project area for example. Another nothing’ scenarios? more sophisticated option would be to identify risk thresholds and acceptable levels of risks for • Identify the implications of fear and risk-aversion. different stakeholders. The experience of a disaster and the ever-present background risk of future disasters can hamper • The economic value of dual purpose development and cause economic paralysis. The infrastructure, as well as possible cost savings, biggest gap in triple dividend knowledge is in can be used to measure the value of the third ‘co- understanding how mitigating such background benefits’ dividend. Assessments to monetise non- risk can help to unlock and stimulate economic market values may also be required to widen the activity. While quantification of these effects scope of assessments of social and environmental is highly case-specific, one option would be to co-benefits. identify risk thresholds and acceptable levels of risks for different stakeholders. 7.3 Communicate outcomes Communicating the triple dividend assessments to other stakeholders such as business, tax payers and political supporters is an essential requirement for integrating the concept into development planning: • Communicate how DRM interventions are linked to, or can be delivered through, other development policies and interventions. Explain the benefits of DRM actions using triple dividend principles and the value of DRM interventions relative to ‘do nothing’ scenarios. 33 34 Further reading References A full set of project outputs can be found at www.odi.org/ Auker, M.R., Sparks, R.S.J., Siebert, L., Crosweller, H.S. tripledividend. and Ewert, J.A. (2013) ‘A statistical analysis of the global historical volcanic fatalities record’, Journal of Applied A set of background papers commissioned to inform this Volcanology 2:2(December 2013). report are published as World Bank Policy Research Papers Carter, P.M.R. and Barrett, C.B. (2006) ‘The economics and can be accessed at http://elibrary.worldbank.org/ of poverty traps and persistent poverty: An asset-based page/wb-working-papers. These include: approach, The Journal of Development Studies 42(2): 178–199. Griffith-Jones, S. and Tanner, T. (2015) ‘Financial Crises and Economic Resilience: Lessons for Disaster Risk Carbon Disclosure Project (CDP) (2015) Climate Change Management and Resilience Dividends’. World Bank Resilience in Europe: A Snapshot of the Private Sector. Policy Research Papers. Washington D.C.: World Bank. London: CDP. Hallegatte, S., Bangalore, M. and Jouanjean, M-A. (2015) Crawford, M. and Seidel, S. (2013) Weathering the Storm: ‘Higher losses and lower development in the absence Building Business Resilience to Climate Change. Virginia: of disaster risk management investments’. World Bank Center for Climate and Energy Solutions (http://www. Policy Research Papers. Washington D.C.: World Bank. c2es.org/publications/weathering-storm-building- business-resilience-climate-change). MacDermott, T.K.J. (2015) ‘Investing in Disaster Risk Management in an Uncertain Climate’. World Bank Policy Dar, M. H., de Janvry, A., Emerick, K., Raitzer, D. and Research Papers. Washington D.C.: World Bank. Sadoulet, E. (2013) ‘A flood of investments: Flood- tolerant rice and farm investment in India’. Berkley: Mechler, R., Mochizuki, J. and Hochrainer-Stigler, S. University of California. (2015) ‘Disaster risk management and fiscal policy. From assessing fiscal risk to building resilience: narratives, Dercon, S. (ed.) (2005) Insurance against poverty. tools and evidences’. 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(2013) Cyclone Phailin in India: Early Warning and Timely Actions Save Lives. Sioux Falls: UNEP, Global Environmental Alert Service. UNISDR. (2015a) Making Development Sustainable: The Future of Disaster Risk Management. Global Assessment Photo Credits Report on Disaster Risk Reduction. Geneva: UNISDR. cover: Danilo Victoriano 37 UNISDR. (2015b) ‘Chile’s investment in disaster risk p.16 : Direct Relief reduction pays off’. UNISDR News Archive. 17 September, p. 25: Kashish Das Shrestha / USAID 2015. Geneva: UNISDR (http://www.unisdr.org/ p. 30: Danilo Pinzon / World Bank archive/45810). About ODI ODI is the UK’s leading independent think tank on international development and humanitarian issues. www.odi.org About GFDRR The Global Facility for Disaster Reduction and Recovery (GFDRR) is a global partner- ship that helps developing countries better understand and reduce their vulnerabilities to natural hazards and adapt to climate change. Working with over 400 local, national, regional, and international partners, GFDRR provides grant financing, technical assis- tance, training and knowledge sharing activities to mainstream disaster and climate risk management in policies and strategies. Managed by the World Bank, GFDRR is supported by 34 countries and 9 international organizations. www.gfdrr.org