Global Assessment Report on Disaster Risk Reduction 2013
From Shared Risk to Shared Value: the Business Case for Disaster Risk Reduction

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122 Part II - Chapter 8
More investment in infrastructure and the built environment will be required over the next 40 years than has occurred over the last 4 millennia. How disaster risk is addressed in the construction and real estate development sectors is therefore going to shape the future of disaster risk reduction.
Where investments in urban development generate new risks or exacerbate existing ones, the cost of disasters is often spread across communities and sectors. These shared costs are not well accounted for and responsibilities are not well defined. A number of disincentives work against businesses investing in reducing disaster risk in urban development, including the promise of high profit from speculative investment and ineffective public regulation.
Large-scale infrastructure projects and new approaches to sustainable urban development provide opportunities for engaging private investors and the construction sector in new public-private partnerships for resilient investment.
Urban development and the
future of disaster risk
Whether or not disaster risk is factored into investment decisions in urban development will have a decisive influence on the future of disaster risk reduction.
The future of disaster risk reduction will be largely played out in city regions. As highlighted in Chapter 2, investments in real estate development and infrastructure in areas exposed to earthquakes, tropical cyclones and tsunamis have contributed to a massive increase in the hazard exposure of produced capital in some regions, particularly in Asia. However, in many cities and countries that have successfully attracted investment in transport and energy infrastructure, ports, airports, housing, industry and services, investment in disaster risk reduction and the capacities to implement have often lagged behind.
As a consequence new patterns of intensive risk have been produced. Worldwide, expected annual average losses to urban produced capital, from earthquake and cyclonic wind damage alone now represent approximately US$180 billion per year (see Chapter 3). At the same time, the transformation of city regions, through badly planned and
managed urban development and environmental modification, has generated new hazards and extensive risks that now are responsible for comparable, additional levels of loss (see Chapter 4).
Historically, much urban growth in low and middle-income countries has occurred through informal mechanisms of land acquisition, building and infrastructure provision. Mortality aand extensive risks are disproportionately concentrated in these countries, where a large proportion of low-income households lives in informal settlements in hazard-exposed areas. GAR09 and GAR11 analysed in detail the nexus between weak urban governance, the growth of informal settlements and the accumulation of disaster risk in low and middle-income countries.
This chapter complements that analysis by illustrating some of the key challenges and opportunities associated with managing disaster risk in formal processes of urban development and infrastructure developmentā€”not only in low and middle but also in high-income countries.
As this chapter will highlight, at present there are only limited incentives for businesses in the urban development sector to invest in risk reduction. However, there is evidence that this incentive structure may be changing. Investing in resilient and sus-
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