This working paper analyzes the full benefits of climate change adaptation investments, divided into three types of dividends. It shows that the benefits that accrue even when the anticipated disaster does not occur are often larger than the “avoided losses” that accrue when disaster does strike. This is important since it shows that the benefits of adaptation investments are often larger than assumed, and don’t always rely on the probabilities of disaster risk.
The key findings of the paper, include:
The triple dividend of resilience (TDR) is an approach that considers avoided losses (first dividend), induced economic or development benefits (second dividend), and additional social and environmental benefits (third dividend) of adaptation actions. The second and third dividends are especially important since they accrue regardless of whether the actual climate risk materializes.
The second and third dividends are often highly significant. They can exceed the value of avoided losses and can generate project benefit-cost ratios (BCRs) greater than 1 even when the value of avoided losses is not considered.
Accounting for the full range of benefits demonstrates higher BCRs for adaptation investments than are often assumed. In turn, this can help increase access to project finance, improve project design, and improve ex post monitoring and evaluation.