Recommendations for Disaster Risk Reduction in Latin America and the Caribbean

Understanding DRR investment as a strategic component of sustainable development

Given that disaster-related damages and losses are growing faster than the capacity and resources available to address them, it is essential to increase investment in risk correction and prevention. This approach is not only crucial but also highly profitable, especially when incorporating the concept of the Triple Dividend of Development (TDD). Additionally, investing in DRR means investing in sustainable development and enhancing resilience. It is vital to adopt an integrated approach that creates synergies across various levels and sectors to address the systemic nature of risk.

The RAR24 recommends:

• Increase efforts to generate knowledge that informs decision-making;
• Strengthen governance mechanisms;
• Incorporate a DRR perspective into sectoral public policies;
• Disseminate risk information as a public good. 

Closing the gaps for DRR analysis on financing and investment

The RAR24 highlighted the challenges in conducting comparative, temporal, and spatial analyses of disaster risk reduction investments due to varying definitions of DRR and the lack of disaggregated classification systems. It also emphasizes that the use of quantitative and probabilistic methodologies for a systemic analysis of risk and its cascading effects is still in its early stages. Additionally, there is a need to incorporate an outcome-based approach to investments that includes social, environmental, cultural, and political benefits alongside economic ones.

From these conclusions, the following recommendations are drawn:

• Establishing a standardized recording system;
• Promoting and standardizing investment evaluation methods with social, environmental, cultural, political, and economic criteria;
• Conducting a systematic study of damages, losses, and other disaster-related costs to expand knowledge for DRR-informed decision-making.

Leveraging opportunities to enhance investment in DRR

Investments in compensatory management for LAC during the 2005-2021 period are significantly higher than those focused on corrective and prospective management. However, they remain insufficient, with considerable gaps between growing needs and the actual possibilities for resource mobilization. Additionally, it is essential to integrate DRR criteria and differentiated vulnerability considerations into compensatory actions, transforming them into opportunities to improve corrective and prospective risk management. Furthermore, DRR should not be seen as a standalone sector but as an integral part of development management. Therefore, expanding synergies between DRR and climate investments is encouraged to establish disaster risk reduction as a cornerstone of the environmental agenda. The report also highlights the lack of cross-border investment mechanisms.

In light of these conclusions, the following recommendations are provided:

• Allocate resources appropriately for compensatory, corrective, and prospective actions;
• Integrate a comprehensive DRR perspective into compensatory management to strengthen links with development;
• Enhance the DRR perspective within climate change investments;
• Develop risk-informed investment evaluation mechanisms (with a Triple Dividend of Resilience approach) to support public investment decisions;
• Ensure an intersectional and gender-sensitive approach.

Strengthen and expand DRR financing modalities and instruments

The rising cost of compensatory actions leads to budget reallocations that strain public funds, complicating the management of growing risks in the region and addressing increasing damages and losses. In this context, it is emphasized that including Disaster Risk Reduction (DRR) in public and private investments is cost-effective, meaning that the costs of investing in DRR are relatively low while being essential.

International investment remains the primary source of financing for DRR, even though it represents a small percentage of total Official Development Assistance (ODA) to the region. Meanwhile, the public sector lacks adequate financial protection instruments for disasters, and there are no comprehensive inventories of assets with properly registered vulnerability conditions. Given that the private sector is the largest investor in the region, it is recognized as important to integrate DRR into private initiatives. The growing popularity of thematic bonds represents an available instrument for sustainable financing. At the community level, social risk reduction efforts contribute significantly through individuals and collectives.

The RAR24 recommends:

• Promote national frameworks and strategies for Disaster Risk Reduction (DRR) that encourage prospective management approaches;
• Incorporate innovative instruments that distribute risk across diversified and cost-effective portfolios;
• Develop regulations for the private sector;
• Promote government programs for community-based social disaster risk reduction.