1. Home
  2. Our work and what we do
  3. Catalyzing and financing investment in resilience

The 5-step approach to DRR financing

person climbing steps

UNDRR's five-step approach helps countries build coherent, risk-informed drr financing systems combining public, private and international sources

Take part in our training and enhance your understanding of how to mobilize financing for DRR from different sources

Start DRR financing training

Step 1: Understand the financial consequences of disasters

A first step is to help countries understand the economic and fiscal impacts of disasters by analysing both direct and indirect costs. This is key to guiding future resource allocation, informing debt sustainability assessment and building the case for more investment in DRR. 

UNDRR helps governments interpret and connect existing risk information to their financial systems: 

  • Reviewing and leveraging available disaster loss databases and probabilistic models, including the application of budget stress testing. 
  • Analysing what these data mean for expected disruptions to critical services, fiscal implications and long-term development priorities. 
  • Underscoring the costs of inaction.

Step 2: Analyse the existing financial landscape 

UNDRR supports governments to assess whether the country’s financial landscape enables risk-informed investments: 

  • Reviewing public financial management (PFM) systems and budget processes to assess how DRR is planned, allocated and reported.  
  • Applying UNDRR’s budget tagging and tracking methodology to map domestic public expenditure on DRR and Climate Change Adaptation (CCA), identifying gaps, overlaps and underinvestment. 
  • Reviewing international assistance and private sector contributions to identify opportunities for resilience investment. 

Step 3: Identify and prioritize DRR investment needs 

DRR spending is often spread across institutions and sectors. UNDRR works with national and local actors to define an investment agenda: 

  • Reviewing DRR, adaptation, and sectoral policies and strategies.  
  • Identifying priority investments across sectors and hazards. 
  • Applying criteria such as cost-effectiveness, feasibility and capital intensity to prioritize investments 

Prioritization guides rational resource allocation and helps governments articulate financing needs to donors, MDBs, the private sector and others. 

Step 4: Match needs with financing options 

UNDRR helps governments design a comprehensive menu of financing instruments aligned with the dual goals of DRR financing. 

Financing for risk reduction (examples)

Policy and regulatory reforms 

  • Building codes, land-use zoning, public investment screening, infrastructure stress testing 

Additional revenue streams

  • Stormwater fees, land value capture, payment for ecosystem services, or levies for flood management or environmental restoration 

Budgetary measures 

  • Ring-fencing funding for risk reduction
  • Establishing co-financing mechanisms between central and local governments
  • Establishing participatory budget systems 

Private sector investment 

  • Public-private partnerships (PPPs) and blended finance.
  • Tax and other incentives for resilient investments.
  • Guarantees for local banks for encouraging on-lending to their clients for resilience-building investments.

Public borrowing and market-based instruments 

  • Concessional, non-concessional, resilience and sustainability-linked loans.
  • Resilience bonds.
  • Debt-for-climate and debt-for-resilience swaps.

International finance 

  • Global climate and development finance (e.g. Green Climate Fund, Adaptation Fund, bilateral donors, multi-donors, etc.) 

Financing for shock absorption (examples)

Risk retention (low-severity, high-frequency events) 

  • Reserve or disaster funds with pre-positioned savings for anticipatory action, response and early recovery.
  • Budget reallocation or contingency lines.
  • Emergency or supplemental budgets.
  • Adaptive social protection systems.
  • Pre-arranged credit lines following a disaster.
  • Climate-resilient debt clauses to pause debt servicing after a disaster.

Risk transfer (low-frequency, high-severity events) 

  • Sovereign risk transfer Instruments • Regional risk pools.
  • Catastrophe bonds.
  • Insurance for public assets.
  • Insurance for households and businesses.
  • Sector-specific insurance (e.g. Agricultural, infrastructure or corporate). 

Step 5: Develop a DRR financing strategy and implementation plan  

UNDRR helps governments turn analysis into action by identifying activities, timelines, sequencing and institutional roles. The resulting plan aligns DRR investments with fiscal and development planning, guides policy and financing reforms, and encourages coordinated implementation across ministries, local governments and partners to strengthen national financial resilience. 

These strategies place DRR at the centre of fiscal policy and long-term development planning.