Second preparatory committee holds technical workshop on integrating disaster risk in financing
The Second Session of the Preparatory Committee for the Third United Nations World Conference on Disaster Risk Reduction this morning held a technical workshop on integrating disaster risk in financing.
In opening remarks, Toni Frisch, Ambassador and Senior Advisor of Switzerland and Member of the Bureau for the Preparation of the Third United Nations World Conference on Disaster Risk Reduction, spoke on how disaster risk can be integrated into national planning, policy development and fiscal management. He noted that two outcomes were expected from the workshop: how the promotion of disaster risk reduction and investments could benefit society and business; and identifying the practical actions and opportunities for disaster risk reduction in private and public investment.
Anoja Senvirante, Director of Mitigation Research and Development at the Disaster Management Centre in Colombo, Sri Lanka, spoke on public investment sectors and the importance of integrating disaster risk reduction into public investment. The key was to have a roadmap, a comprehensive disaster management plan, and to ensure planning guidelines and building codes in order to save lives and houses in disaster prone areas.
Sandra Lucero Rodriguez Samaca, Deputy Minister at the Colombian Ministry of Finance and Public Credit, presented the experience of the Colombian Government in financing disaster management, in particular contingences in cases of natural disasters, investment in infrastructure and public risk in various communities. The Government was planning to come up with a new financial instrument, which would help reduce the burden on the State sector and involve contributions from the private sector.
Molly Jahn, Professor at the University of Wisconsin-Madison, said that the global scientific community could make risks more visible through different kinds of investments, spurred by the demand from nations and businesses operating in a global environment. The scientific community could play a key role in testing strategies to manage known and new risks by stepping into partnerships with various decision makers and the private sector.
Sebastian von Dahlen, Chief Economist at the Bank of International Settlements, focused on the way climatological changes influenced societies and the poorest, and on improving access to protection and growth. He presented measures to be undertaken to integrate disaster risk reduction and resilience in the financial system in order to benefit the entire population, in particular the poorest: better risk identification and better risk avoidance and reduction through the strengthening of social and economic resilience.
Rowan Douglas, Chairman at the Willis Research Network and Member of the United Kingdom Natural Environment Research Council, focused on the issue of reducing the underlying risk factors from natural disaster risk. He noted that in structural terms countries would be facing a much greater risk from the environment in the years and decades ahead, due to demographic factors, migration, urbanization, and agricultural risk. Governments and all stakeholders thus had to think about general structural factors rather than only conditions at a micro level.
In the ensuing discussion, speakers highlighted the need for governments to adopt better building regulations and codes in order to increase resilience and reduce emergencies. They also noted that cities in developing countries had lower resilience levels because their citizens were not included in the financial systems and public insurance schemes. One speaker reminded that traditional knowledge outside Western perspectives should be used more and included in decision-making, which was particularly important in the framework of the post-2015 development agenda.
Another important issue raised was the importance of including gender perspective and women’s rights in disaster risk reduction. Having in mind that women were involved in the informal sector and that their activities were invisible and undervalued, participants were concerned that the disaster cost by women was not quantified. The participants also raised some the challenges during the discussion: the invisibility of risks and lack of data thereof; time challenges; uncertainty; the integration of risks; and quantifying risks. One idea that came up was the establishment of a steering committee or even a global standard settings agency to oversee the development of standards to be applied by rating systems and other private sector agencies.
In concluding remarks, Mr. Frisch said that the issues that were raised but not addressed during the session would be further discussed at the World Conference in Sendai.
Mr. Douglas suggested the creation of a multi-sector and multinational specialist working group that would focus on the insurance sector and would be accountable under the Hyogo Framework of Actions and the post 2015 framework for disaster risk reduction.
Ms. Jahn reiterated the importance of sharing information and involving the science community in designing new approaches to risk reduction, as well as reaching out to communities that were less represented in such consultations.
Ms. Seneviratne concluded by saying that a lot of support and resources should be shared in order to create a global resilient world.
Speaking during the discussion were Cuba, Ecuador, France, the Netherlands, Japan, Business and Industry Major Group, Indigenous Peoples Group, Children and Youth Major Group, Workers and Trade Unions Group, UN Women, Science and Technology Major Group, Prince Wales’ Accounting and Sustainability Project, Vice Mayor of Beirut, Women’s major Group, and the African Risk Capacity of the African Union.
The Second Session of the Preparatory Committee for the Third United Nations World Conference on Disaster Risk Reduction will meet in plenary at 4:30 p.m. this afternoon to conclude the session. The Third World Conference will be held from 14 to 18 March 2015 in Sendai, Japan.
Technical Workshop Two: Toward the Integration of Disaster Risk in Financing
Opening Remarks
TONI FRISCH, Ambassador and Senior Advisor of Switzerland and Member of the Bureau for Preparation of the Third United Nations World Conference on Disaster Risk Reduction to be held in Sendai, Japan in 2015, moderated the workshop. Underlining the objectives of the workshop, Ambassador Frisch, spoke on how disaster risk can be integrated into national planning, policy development and fiscal management. Two outcomes were expected from the workshop. First, how the promotion of disaster risk reductions and investments could benefit society and business. Second, what were the practical actions and opportunities for disaster risk reduction in private and public investment? The meeting would result in a summary and a written protocol that would be distributed. Ambassador Frisch stressed the importance of financial aspects, and underlined the fact that many countries were concerned about the funding of disaster risk reduction. There was also a concern that already pledged or re-pledged funds could go elsewhere and it was therefore essential to have mutual understanding and confidence that there was a clear basis. This was a critical moment, a crossroads, in disaster risk reduction, and a good moment to rethink whether traditional measures were sufficient.
ANOJA SENEVIRANTE, Director of Mitigation Research and Development at the Disaster Management Centre in Colombo, Sri Lanka, spoke on public investment sectors and the importance of integrating disaster risk reduction into public investment. The studies that Sri Lanka had undergone following the tsunami underlined that disasters affected the public sector as well as the private sector. Her Centre was undergoing studies on how to incorporate disaster risk reduction in the legislative and institutional framework. The key was to have a roadmap, a comprehensive disaster management plan, and to ensure planning guidelines and building codes in order to save lives and houses in disaster prone areas. Ensuring the use of appropriate procedures and guidelines for responding to disaster and having a checklist system and a design system were crucial. Ms. Senevirante underlined that vulnerabilities were different. Road sector vulnerability was different from house sector vulnerability. She concluded that the impact of development on disaster was just as important as the impact of disaster on development. They had to incorporate disaster in development, and build stronger buildings and roads, in order to have resilience in the future.
SANDRA LUCERO RODRIGUEZ SAMACA, Deputy Minister at the Colombian Ministry of Finance and Public Credit, presented the experience of the Colombian Government in financing disaster management, in particular contingences in cases of natural disasters, investment in infrastructure and public risk in various communities. The Government attempted to establish reliable information on risk and then focused on transparency in administration. In that way it was possible to establish how much public investment was necessary to set aside for disaster risk management. The Government was planning to come up with a new financial instrument, which would help reduce the burden on the State sector and involve contributions from the private sector. To that end some laws were already passed to allow for collaboration with insurance companies in the development of financial instruments for disaster management.
MOLLY JAHN, Professor at the University of Wisconsin-Madison, reminded that during the Frist Session of the Preparatory Committee, Member States had stated a clear demand that collaborative approaches to the management of familiar and new risks be elaborated. Member States had also asked for clearer definitions of risk and more accurate reflections of risk, as well as innovative strategies to manage that risk. She described innovations in a global scientific community focusing on collaboration across boundaries, national boundaries, towards more accessible and accurate information and models of risk management approaches. She stressed that the global scientific community could make risks more visible through different kinds of investments, spurred by the demand from nations and businesses operating in a global environment. She concluded by stressing the important role that the scientific community could play in testing strategies to manage known and new risks. Their key role was to step into partnerships with various decision makers and the private sector in order to test innovative partnerships and approaches to reduce the consequences of global threats.
SEBASTIAN VON DAHLEN, Chief Economist at the Bank of International Settlements, focused on the way climatological changes influenced societies and the poorest, and on improving the access to protection and growth. Climatological disasters deserved most attention because of their severity and great impact on the society and economy, in particular in the poorest countries. For example, small island developing States were exposed to specific climatological events, such as extreme wind, floods and sea levels, and it that respect more analyses in terms of disaster risk and management was needed. He presented measures to be undertaken to integrate disaster risk reduction and resilience in the financial system in order to benefit the entire population, in particular the poorest. That could be done through better risk identification and better risk avoidance and reduction through the strengthening of social and economic resilience.
ROWAN DOUGLAS, Chairman of the Willis Research Network and Member of the United Kingdom’s Natural Environment Research Council, turned the participants’ attention to Priority 4: “Reducing the underlying risk factors from natural disaster risk. He cautioned that structurally the world would be facing a much greater risk from the environment in the years and decades ahead, namely due to demographic factors, migration, urbanization and agricultural risk – these were all structural factors. They had to think about that structurally and not at a micro level. The challenge was that risks that the world was facing were significant but infrequent events and that was why they were not incorporated into finance, in addition to the fact that financial statements were produced on an annual basis. They had to find ways of incorporating the price of disaster risks into every single financial transaction.
Discussion
Cuba recognized the need to have forecastable and adequate resources to improve disaster risk reduction. Industrialized countries had to respect all commitments in terms of development such as achieving by 2015 the objective of dedicating a percentage of their GDP to the development of developing countries.
Scientific and Technological Major Group referred to the need to insist on designing and implementing building codes which required education and cautioned against giving too much credence to promises that came along with new financial instruments on losses in the future. There were dangers for creating new risks that arose from what had become known as the platforms. Finally, the Group urged all to work together so that good intentions would be translated into tools and practices that supported resilience and did not put it in further danger.
Prince Wales’s Accounting and Sustainability Project stressed the importance that the role of finance and accounting could play not only in disaster risk reduction but in a wide range of environmental and societal risks and opportunities. The Project raised four challenges. One of them was that many risks were invisible and there was a lack of data on them. This was where the finance and accounting community in collaboration with the public and private sectors could make a very significant contribution. The other challenges were time challenges, uncertainty, and integration of risks. Finally, a challenge was putting a number to some of the risks and the transformative impact that this could have.
Business and Industry Major Group spoke about regulations and codes in the construction sector, as well as about how finance could help building better from the start because a more resilient world would reduce the need to have more emergencies. Governments were reluctant to move the building codes above the minimum because they could not afford to make higher standards. The Group urged the need for more investments in that respect. A representative of an engineering design company said that disaster resilience was important to lower risk investments.
Japan said it attached great importance to real risk reducing investment, in particular financial mechanisms that would allow it. Japan observed that resilience in cities like New York, Tokyo and Paris was at a very high level, whereas it was significantly lower in cities in developing countries. In that respect, Japan asked what financial means could improve this imbalance.
Answering the question of Japan, ROWAN DOUGLAS, Chairman at the Willis Research Network and Member of the United Kingdom Natural Environment Research Council, said that cities in developing countries had lower resilience levels because their citizens were not included in the financial systems and public insurance schemes. He suggested that the financial systems in those countries needed to find ways to be more inclusive, taking into account risk factors. In other words, capital should serve wider communities.
Netherlands spoke about ways that social and physical engineering could be strengthened through exporting some of the resilience models in large cities in developed countries to other cities and countries. The Netherlands shared its experience in climate change adaptation with New York officials, who set up a public competition for resilience models that involved businesses and local communities. Such competitions could be exported to other cities and countries in order to promote successful resilience models.
Indigenous Peoples Group spoke to the science and technology community, noting that traditional knowledge outside Western perspectives should be used more and included in decision-making. That was particularly important in the framework of the post-2015 development agenda. Speaking to the business and industry community, the Group asked for appropriate safeguards and participation in decision-making, and in particular for investment in community resilience and social protection measures, such as poverty eradication, child care and education. The Group stressed that the goal should not be just achieving profits but achieving the so-called triple bottom line that integrated social, environmental and financial targets.
The Vice-Mayor of Beirut spoke from a local authority point of view, stating that cities were growing at a very fast pace. To be sure, 6.3 billion persons would be living in cities by 2050. Proper infrastructure alone amounted to more than 100 trillion financing needs in a year. There was a need to invest more in infrastructure in cities, including financing risk from disaster as well as any related energy shortage. Factors that prevented cities to access funding to ensure sustainable urban development were, in particular, lack of local capital markets and the fact that they relied on the State budget.
The African Risk Capacity, Agency of the African Union, informed that they worked primarily with the assessment of countries’ operational capacity. The Agency could only provide up to $ 30 million to cover the need of other types of risk, and suggested that recognizing this need for financial and operational preparedness for disaster was acknowledging the demand for lower income countries. The Agency proposed to look at the role of incentivizing and establishing a steering committee to oversee the development of standards to be applied by rating systems and other private sector agencies. These would offer assessments to countries and other stakeholders to open up the access of finance and link it from the viewpoint of having a global standard settings and agency in the post 2015 framework.
Women’s Major Group cautioned that many disasters remained hidden, and that the disaster cost by women was not quantified. Violence towards women increased following disasters, and the loss of productivity from domestic violence could be between 2-10 per cent of GDP. Thus, the opportunity costs of not addressing the gender disaster risk were high. Rebuilding the livelihood of women would bring benefits to the whole economy. There was a need to recognize women’s role through regulatory and financial means. A gender response and budgeting were needed to facilitate fighting against the main underlying risk factors for women: gender inequality.
UN Women stated that while most discussions focused on the macro level, the poorest that were affected by disasters were women. Women were involved in the informal sector, and their activities were invisible and undervalued. We needed to work on how to extend access of disaster risk finance to rural women who were most at risk to disasters. What was also needed were tools and mechanisms to understand what was going on at the informal level, the household level, the rural level. How to collect that data was a challenge.
Children and Youth Major Group shared their opinion about increasing youth equality in decision-making regarding the financial framework for disaster management, and about creating a micro economic environment that was conducive to sustainable development. They pointed out the need to pay attention to ecological reform and extraction of resources, as well as the strengthening of investments and assets for reducing disaster risks.
Workers and Trade Unions Group highlighted the need and obligation of Member States to provide safe drinking water, sanitation, health and social services, education, public transport, fire and other protection to workers, noting that universal social protection underpinned resilience. While stating that the interplay between private capital and private finance, and profit making and public policy was complex, more public investment was needed to respond to the ongoing global financial crisis.
Ecuador said it had started a programme of cooperation in disaster risk reduction financing with private banks in order to give more incentive to the private sector. The Government offered incentives of debt reduction to supply and building companies.
France shared its experience in risk and disaster management, in particular information sharing regarding compensation damages, and shared responsibility in risk reduction. The French Government set up different methodologies of costs and benefits, and it included citizens and the private sector in that process.
Concluding Remarks
TONI FRISCH, Ambassador and Senior Advisor of Switzerland and Member of the Bureau for Preparation of the Third United Nations World Conference on Disaster Risk Reduction, in concluding remarks, said that the issues that were raised but not addressed during the session would be further discussed at the World Conference in Sendai.
ROWAN DOUGLAS, Chairman of the Willis Research Network and Member of the United Kingdom’s Natural Environment Research Council, in concluding remarks, suggested the creation of a multi-sector and multinational specialist working group that would focus on the insurance sector and the financing of risk reduction, which would be accountable under the Hyogo Framework of Actions, and the post 2015 framework for disaster risk reduction.
MOLLY JAHN, Professor at the University of Wisconsin-Madison, reiterated the importance of sharing information and involving the science community in designing new approaches to risk reduction, as well as reaching out to communities that had been less represented in such consultations.
ANOJA SENEVIRANTE, Director of Mitigation Research and Development at the Disaster Management Centre in Colombo, Sri Lanka, concluded by saying that a lot of support and resources should be shared in order to create a global resilient world.
For use of the information media; not an official record
M14/018E