Financing prevention
Financing prevention and de-risking investment
Governments are under-prepared to tackle the systemic nature of risk and are underinvesting in prevention and resilience. As the reality of climate impacts hit, and if the current approach continues, we will continue to face increased losses.
Total economic losses from natural hazards and human- induced disasters in 2024 was estimated at $328 billion, of which 57% were uninsured. Indirect socio-economic costs of disasters are many times greater. Disaster costs now exceed over 2.3 trillion annually when cascading and ecosystem costs are taken into account.
Challenges
Current actions are not commensurate with the sheer scale of the challenge – the rapid accumulation of disaster risk that is systemic, interconnected and cascading. Actions to reverse this trend are needed if governments want to achieve the goals of the Sendai Framework for Disaster Risk Reduction 2015-2030.
For every $100 spent on total development aid (ODA), as little as $2 was allocated primarily for disaster risk reduction between 2019-2023. During the same period, 97% of humanitarian aid was spent on emergency response, reconstruction, relief, and rehabilitation, while less than 3% was invested into disaster prevention and preparedness.
Domestic finance shows similar patterns. In certain countries, domestic public finances earmarked for risk prevention as a primary objective are on average less then 1% of national budgets, suggesting a chronic underinvestment in disaster risk reduction. Disaster resilience is not prioritized because it is wrongly perceived as politically risky – a cost for an event that might never happen within a political term.
As a result, domestic and international expenditures are estimated to meet only 10 to 25% of needs for disaster risk reduction and climate adaptation in most countries.
We are stuck in a vicious circle where the financial cost of disasters is rapidly rising, strapping governments in their ability to mobilize and provide necessary funds, trapped in the vicious and self-fulfilling cycle of disaster-response-recover-repeat.
Many governments, businesses and financial institutions of all shapes and sizes often do not regularly incorporate considerations related to their exposure and vulnerabilities to the range of hazards identified by the Sendai Framework in their financial decision-making.
Call to action
Recognizing these challenges, Governments have committed to scaling up investment in DRR at the Fourth International Conference on Financing for Development (FFD4). They also issued specific calls to invest at the mid-term review of the Sendai Framework, including by:
- Identifying gaps in public spending, allocating increased domestic resources, and developing comprehensive financing strategies for disaster risk reduction
- Promoting disaster risk assessments as a prerequisite for infrastructure investments in all sectors and stress-testing of critical infrastructure systems
- Engaging with the private sector to scale up investment in disaster risk reduction and encouraging financial authorities to integrate this issue
- Incorporating disaster risk reduction measures into development assistance programmes and reforming international financial institutions
- Enhancing financing for early and anticipatory approaches and promoting the development of innovative instruments and tools
Under the South African Presidency, G20 members have also endorsed the Voluntary High-Level Principles for Investing in Disaster Risk Reduction. These principles provide, for the first time, a dedicated international reference for countries seeking to systematize financing for this priority. They outline the key elements countries need to consider and serve as a blueprint to guide national actions.
UNDRR’s support
UNDRR works with governments, UN partners, financial institutions, and other stakeholders to close the financing gap, including:
Deliver targeted technical assistance and capacity-building to help countries design national financing systems for DRR adapted to their local context and reform public finance management (PFM) system
Advise countries on institutional and policy reforms to integrate disaster risk into public financial management, using tools like budget tagging to enhance transparency and resource allocation
Catalyze private-sector engagement and drive financial innovation to unlock new sources of resilience financing, such as resilience bonds
Advance knowledge by disseminating good practices, fostering international collaboration, and providing data insights on disaster-related financing through a global observatory
Thanks to the support of our donor partners, UNDRR has been able to support several countries in these areas.