Ministerial Roundtable 2 “Risk-Informed Investments & Economics of Disaster Risk Reduction”

SPEECH BY SRSG

GP2019 – 16 May 2019

Roundtable 2 “Risk-Informed Investments & Economics of DRR”

I hope some of you will have seen the press release we issued last week outlining an initiative by a large Norwegian Pension Fund, KLP, to start geo-tagging investment assets against their exposure to disaster and climate risk.

This is a further sign that efforts by the UN, the insurance industry, and groups like our own ARISE network are starting to have a real impact on how the private sector views risk and makes provision for ensuring full transparency on exposure to risk, to the benefit of both shareholders and employees.

Given the huge disaster-related economic losses of recent years, it makes sense that the private sector, financial institutions and regulators, should start to pay closer attention to the integration of disaster risk management – including business continuity planning – into business models and practices.

Investment in disaster risk reduction generally represents a large saving in terms of avoided losses and reconstruction costs with cost benefit ratios ranging from 3:1 to 15:1 or higher in some cases.

The World Bank has found that disasters caused by natural hazards cost $520 billion in welfare losses and force up to 26 million people into poverty every year. Without investment in disaster risk reduction, climate change could push more than 100 million people into extreme poverty by 2030.

It seems that disaster mitigation can indeed save money in numerous circumstances, but how much money can be saved should not be the only question.

Many social and environmental benefits also flow from well targeted investment in reducing disaster risk or avoiding its creation in the first place.

To cite just one example, how many of 138,000 lives lost could have been saved in Cyclone Nargis when it struck Myanmar in 2008, if the mangrove forests had been left in place? How much less damage would have been inflicted on a major rice growing area?

The cascading impacts of a disaster are felt throughout society when schools are filled with displaced people, health facilities are flooded, and productive farmland is inundated with sea water.

Cost benefit analyses rarely take into account the societal downstream impacts of disasters but these need to be highlighted when we consider the economics of DRR.