Business case for DRR: Why investing in DRR makes sense

The resilience dividends across the SDGs

The triple dividend of building 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 disaster risk reduction actions. The second and third dividend accrue regardless of whether the actual risk materializes.

Resilient infrastructure

• In low- and middle-income countries, investing in more resilient infrastructure yields US $4 in benefit for each $1 invested.
• Investing in low carbon microgrids can increase disaster resilience, while contributing to emission reduction.
• Society enjoys a benefit-cost ratio (BCR) of 11:1 for adopting the 2018 International Residential Code (IRC) and International Building Code (IBC).

Preparedness

• According to a 2009 study, $1 spent on preparedness is worth about $15 in terms of the future damage it mitigates.
• Every US$1 invested in risk reduction and prevention can save up to US$15 in post-disaster recovery.
• A U.S. study reported that every $1 invested in resilience and disaster preparedness saves $13 after a disaster. Of this amount, $7 comes from reduced community economic costs, and the remaining $6 comes from reduced damage and cleanup costs. See the publication for further financial benefits of preparedness in specific U.S. cities.
• A cost-benefit analysis (CBA) in Georgia, finds that the USD 2.4 million of external support to the disaster risk management programme of Georgia Red Cross Society (GRCS), launched in 2010, has paid off extremely well. In the three surveyed areas, identified benefit-cost ratios range between 12.51 and 54.54.
• Every $1 invested in preparing for climate-caused health risks can yield up to $68 in benefits for communities in Africa, Asia, Latin America and the Caribbean, and the Middle East.
• Every dollar spent by the U.S. Forest Service on actively managing public lands to reduce wildfire risks by clearing underbrush and trees, or employing prescribed burns, avoided $3.73 in smoke, property, and emissions harm.

Early warning and early action

• Just 24 hours warning of a coming storm or heatwave can cut the ensuing damage by 30 percent. Spending US $800 million on such systems in developing countries would avoid losses of US $3–16 billion per year.
• Potential benefits from avoided losses could be as much as US $66 billion.
• Reliable and accurate early warning systems create benefits worth at least ten times their cost of implementing, saving lives and assets.
• Improvements made in National Meteorological Hydrological Services in order to reduce disaster losses in developing countries may generate benefit-cost ratios (BCRs) from 4 to 1 to 36 to 1.
• Climate services investments overall have a cost benefit ratio of one to 10.
• In Bangladesh, cyclone early warnings have significantly decreased the number of cyclone-related fatalities. During the Cyclone Matmo-Bulbul in 2019, less than 20 lives were lost, and 2.1 million people were safely evacuated to evacuation centres.
• In Samoa, according to a 2019 study, for every US $1 invested in early warning services for cyclones, there is a return of US $6 as a benefit.
• A study shows that 50% more accurate forecasts are worth at least US$2.1 billion per year based on the mortality benefits alone.

Resilience dividends from DRR interventions

Employment and poverty reduction

• Investing in resilience can foster economic growth and employment. ILO estimates that every US $1 million invested in climate adaptation infrastructure in the construction sector creates close to 650 jobs in India, 200 in China, 160 both in Brazil and in Indonesia, and 120 in the Russian Federation.
• Options to build people’s resilience, such as financial inclusion or social protection measures, are also good poverty reduction and development policies. In Bangladesh for example, reducing the exposure of poor people could prevent asset losses of $360 million a year, generating well-being gains equivalent to $1.5 billion a year.
• Investing in climate and nature resilience could generate over 280 million jobs across emerging markets and developing economies by 2035, while boosting GDP and unlocking a trillion-dollar market opportunity. 

Economic benefits

• Investments in adaptation deliver four times more benefits than costs, with an average annual return rate of 25%.
• Companies stand to gain up to 21 times return for every dollar invested in physical climate risk mitigation.
• In some vulnerable economies, adaptation could increase GDP by up to 15% by 2050, while strengthening fiscal stability and reducing debt risk. 
• In the Pratomagno area in Italy, heather is harvested along fuelbreaks. The harvested heather is used to produce biological brooms. Consumers are willing to pay 17% more than the market price for these brooms to support fire prevention and protect wildlife habitat.
• In Spain, herds of sheep, goats and cows get deployed to graze at the edge of the forest. This helps prevent wildfires from spreading to populated areas. Dairy products have a label certifying the fuel management activity to inform consumers about the herds’ role in fire risk management. Shepherds receive public subsidies for each hectare grazed within the initiative.
• After the “Mompantero fire” in Italy, an initiative sought to reduce hazardous dead-wood accumulation. The wood is gathered and transformed into furniture. The product branding draws attention to the problem of extreme wildfires. The campaign increased sales of the products tenfold between 2018 and 2022.
• Every £1 invested in societal resilience produces £35.12 in public value when disruptions occur every five years, meaning that relatively small investments (e.g. £5,000) can generate substantial returns (around £176,000) through improved preparedness and community resilience.
• Early and strategic investments in adaptation can bolster economic stability, reduce debt levels and borrowing costs, and accelerate development. Economic metrics indicate median economic benefit–cost ratios of around 4:1 and economic internal rates of return of about 25% representing substantial returns on adaptation investment.

Food security and agriculture

• Climate services such as seasonal forecasts, drought advisories and fire danger indices improve agricultural yields and strengthen food security. Climate services investments overall have a cost benefit ratio of one to 10.
• Risk reduction measures at farm level can yield many economic, social and environmental benefits. In Zimbabwe for instance, farmers using drought-tolerant maize were able to harvest up to 600 kilograms more maize per hectare than with conventional maize.
• Research in Belize shows that in some areas, even small amounts of mangrove restoration can have big tourism and fisheries benefits. While storing and sequestering millions of tons of carbon and boosting lobster fisheries by 66%, this research claims mangrove tourism may be worth several million dollars annually and reduces the risk of coastal hazards for at least 30% more people.
• Two flood-resistant rice varieties are helping farmers in Africa to improve productivity, with huge potential returns for countries affected by climate change, agricultural food experts say.

Urban resilience

DRR investments in cities not only reduce disaster risk, they also improve the quality of life in urban settings.

• An investment in smart surface technologies - such as solar roofs, green roofs, and porous and high albedo pavements - would result in net present values of US $1.8 billion in Washington, D.C., US $3.6 billion in Philadelphia and US $540 million El Paso over a 40-year period. These technologies can effectively address the severe cost of worse air quality, higher pollution and excess heat in urban low-income areas.
• Trees and vegetation can lower local land temperatures by up to 5-6℃ on days of extreme heat, reducing energy use for air conditioning. Urban forests also improve the quality of life in cities: they reduce air and noise pollution; help filter and regulate water and provide spaces for recreation and physical activity.

Nature-based solutions

Built infrastructure systems can be supported by nature-based solutions to reduce disaster risk, while strategically conserving or restoring ecosystems and supporting livelihoods.

• One dollar spent on ecosystem restoration provides economic benefits 7 to 30-times greater.
• Targeted investments of USD 3–4 billion in nature-based solutions across Africa could generate more than USD 7 billion in avoided climate losses by 2100, with benefit–cost ratios rising to up to 8:1 when applied strategically at corridor, catchment or landscape scale.
• Mangrove forests provide more than US $80 billion per year in avoided losses from coastal flooding—and protect 18 million people. They also contribute almost up to US $50 billion per year in non-market benefits (fisheries, forestry, and recreation). Combined, the benefits of mangrove preservation and restoration are up to 10 times the costs.
• Mangrove presence reduces property damages significantly. In Collier County, Florida, mangroves reduced damages by 14% during Hurricane Irma and by 30% during Hurricane Ian.
• Robust coral reefs can reduce wave energy by 97% and wave height by up to 88%, a degree of protection equivalent or at times superior to many engineering structures.
• Each €1 invested in creating water detention areas in Europe can save €4 in avoided damages in a 3°C warming scenario.  
• A large-scale floodplain restoration programme would have many benefits in Europe, including reduced costs for dike reinforcement (€229 million), reduced flood risk (€1360 million), more flexibility in flood risk strategies in the long-term, and diversification of economy (e.g. tourism: €1152 million and fishery: €140 million) in the long term and job provision in the short term (supporting ~200.000 jobs).
• Evidence collated by the United Kingdom's Environment Agency shows that natural flood management effectively reduces the overall damage from flood risk. Research looked at ten natural flood management schemes created by individual Wildlife Trusts. Collectively, they had an average total cost-benefit ratio of 4:1 over ten years, rising to 10:1 over 30 years (every £1 invested in natural flood management (NFM) is expected to deliver £10 of benefits).
• Scenarios with significant forest restoration or preservation demonstrated flood peak discharge reductions exceeding 10%. A maximum afforestation scenario across the catchment can reduce Total Annual Average Damage by approximately 12%.

Water

• Securing water for our societies by 2030 could cost just over 1% of global GDP — about 29 cents per person, per day from 2015-2030. The economic benefits clearly outweigh the costs: every dollar invested in water access and sanitation yields an average $6.80 in returns.
• In Kenya, drought resilience building could save US$1.3 billion, or an average of US$84 million per year, when avoided losses are incorporated over 15 years over the cost of a late humanitarian response.

Research suggests that the cost of climate change is widely underestimated. If we do not invest in climate action and disaster risk reduction, the economic and human toll of disasters will rise dramatically.

• The number of people in need of humanitarian assistance as a result of storms, droughts and floods could climb beyond 200 million annually by 2030 – compared to an estimated 108 million today. This rising human toll would come with a huge financial price tag, with climate-related humanitarian costs ballooning to US$20 billion per year by 2030, in the most pessimistic scenario.
• Failing to implement better water management policies could result in regional GDP losses from 2-10% by 2050.
• The worsening impact of climate change could displace 140 million people within their countries borders by 2050.