Expert Group Meeting, 15 November 2010, Brussels, Belgium
'Effective Investment in Disaster Risk Reduction'
Summary of Proceedings
1. 	Context
1.1 	The context of the Expert Group discussions on the effective investment in disaster risk reduction, as set out by Kristalina Georgieva, European Commissioner for International Co-operation, Humanitarian Aid and Crisis Response and Margareta Wahlstrom, UN Special Representative of the Secretary General for Disaster Risk Reduction, is summarized in the points below.
1.1.1	Understanding what constitutes effective national and local investments that reduce disaster risk is a crucial topic for the United Nations and the European Commission if they are to ensure that each institution assists Government in managing the risk of disasters, achieve the Millennium Development Goals (MDGs) and adapt to climate change. This fact is set against the growing impact of disasters in the countries that the UN and EC are assisting as part of their respective humanitarian and development aid as well as in European countries. In Europe, 90% of disaster events are related to the climate and therefore sensitive to climate change trends.
1.1.2	The first five years of the Hyogo Framework for Action 2005-2015: Building the Resilience of Countries and Communities to Disasters focused with a certain success on strengthening institutions and bringing the topic closer to planning, finance and sectoral development Ministries. International Financing Institutions (IFIs) are paying more attention to the topic - as reflected in the UNISDR partnership with the World Bank and its Global Facility for Disaster Risk Reduction (GFDRR). The Asian Development Bank (ADB) recently led a Ministerial Roundtables on Financing Disaster Risk with UNISDR in Incheon, Korea. The latest iterations of the reports by Governments on progress in the implementation of the Hyogo Framework confirm the fact that Government and local authorities have made considerable progress in revising and strengthening strategies and plans - and in some cases legislation - that reduce disaster risk. In a number of countries, these same strategies are also addressing climate change adaptation.
1.1.3	In 2009, the EC approved two strategies on prevention inside the EU and disaster risk reduction in developing countries. In 2010, the Commission advanced proposals to further strengthen the EU's disaster response capacity. A Communication to this effect was adopted on the 26th of October 2010. The underlying idea is that Europe needs to move away from an ad hoc response to one which is pre-planned, predictable and immediate. Proposals comprise inter alia the development of reference scenarios and  a mapping of Member States’ civil protection assets.  In 2011 in addition to the implementation of the response Communication, the focus will be on disaster prevention and preparedness in the EC .The EC has recently published a Green paper {EU development policy in support of inclusive growth and sustainable development - Increasing the impact of EU development policy), launching a public consultation on the future of the EU Development policy which is expected to result in a new development policy. The Green paper places significant emphasis on disaster risk reduction. The topic concerns a number of Directorates, in particular DG ECHO, DG DEV, DG RELEX, DG Research, DG CLIMA and DG ENV. Finally the Commission intends to adopt a Communication on an Implementation Plan of the above-mentioned EU strategy for supporting DRR in developing countries. It would represent an important step towards the ultimate aim of a comprehensive and innovative EU strategy on DRR - covering both inside and outside EU- which could be the topic of further policy work in 2011/2012 with the view ,both through development cooperation and humanitarian aid, to pursuing an integrated approach to disaster management with prevention, mitigation, and preparedness as equal priorities to response and at exploiting whenever appropriate the synergies between the internal and external processes and actions.
1.1.4	In many countries over 80% of the economy is driven by the private sector. The private sector has been playing a growing role in offsetting some of the financial risk of countries and communities for when disasters strike. The challenge now is to engage the private sector into investing in measures that reduce the risk.
1.1.5	Government, local authorities and the private sector are keen to hear from the experience of other countries on what constituted the most effective manner to ensure that existing and new development investment is carried out in a manner that reduces risk. The EC and UNISDR convened the one day Expert Group against this background. The outcomes are feeding into the respective institutions work on disaster risk reduction and specifically the preparations for the Third Session of the Global Platform for Disaster Risk Reduction, 8-13 May 2011, Geneva, Switzerland and a Thematic Debate of the UN General Assembly, 9 February 2011 on this topic.
1.1.6	Identifying the questions that we should collectively be asking ourselves around risk reduction financing should drive the much need acceleration of efforts to implement the Hyogo Framework for Action while contributing to guiding the financing of climate change adaptation.
2.   	Key Emerging Issues
2.1 	Relationship between pro-growth development policies, disaster risk reduction and climate change adaptation
2.1.1	Considerable opportunities exist to strengthen hazard resilience by mainstreaming disaster risk concerns into pro-growth development policies and program in areas such as infrastructure and agriculture. Understanding how to seize such opportunities and what language should be used with, say Ministers of Finance, remains challenging. Issues arise when identifying the most critical investment in the context of disaster risk versus the more cost effective. UN/World Bank Economics Study "Natural Hazards, Un Natural Disasters: The Economics of Effective Prevention" (2010) is the most recent study that has looked at a number of the economic angles while also reflecting a number of gaps in our understanding of what constitutes cost-effective, risk resilient development.
2.1.2	Data, expertise and capacities are lacking in countries to assist in the difficult task of balancing immediate, more politically-motivated priorities and longer-term ones.
2.1.2	Ensuring funds reach poorer social groups, including in middle income countries, for instance by ensuring that social funds incorporate disaster risk reduction principles and via better targeting of post-disaster relief and recovery resources through other social protection instruments. Private sector engagement in micro-insurance schemes that target poorer groups have been mostly tested through pilot projects and few operate on a larger scale. Derivative products with parametric trigger also questionable for individual coverage.
2.1.3	In any upcoming discussions on what constitutes sound investments, space needs to be provided to defining boundaries of responsibility and accountability between the state, insurance industry and individuals.
2.2 	Innovative country and local level financing that reduces risk
2.2.1	Suggestions of targets are emerging on national, regional and global contexts, such as, for example, 10% of response funds, 2% of development funds and 2% recovery funds should finance disaster risk reduction. The Chairs Summary of the Second Session of the Global Platform for Disaster Risk Reduction suggested that 30% of adaptation resources should address the risk of extreme events. While useful for advocacy and setting benchmark against which to monitor progress, the diverging of such existing resources remains challenging in some countries. For examples, response funds remain often insufficient to cover urgent needs and such funds are rarely readily available in budgets. There are issues in tracking levels of spending on disaster risk reduction as well, in humanitarian, development and adaptation financing.
2.2.2	When is the cost of reducing the risk of natural hazard and climate change of a development sector or any relevant national and local expenditure item incremental or a trade off? While climate change adaptation expenditure is often seen as incremental i.e. example of UN Capital development Fund with local government policies in Vietnam (25% increase of existing budget lines to address climate change impact), efforts to ensure that similar policies are resilient to natural hazards are addressed (or expected to be) through core development budgetary lines. Implication need to be better understood and communicated.
2.2.3	A specific reflection is required around the issue of conditionality/incentives or criteria for financial allocation. For infrastructure support, impact assessments are required - start of conditionality. Conditionality provides 'comfort' for private sector engagement. Accountability - example of 'Adaptation Watch' a new initiative under transparency international. Opportunity to promote a 'Disaster Risk Reduction Watch'? What would be the format of such a mechanism?
2.2.4	Cost benefit analysis can be applied to determine the economic effectiveness of risk reduction measures but the results are highly context specific and the existing body of evidence too limited to draw simple rules of thumb on the net returns to different risk reduction measures. IFI and government investment projects-often require some form of cost/benefit analysis and related guidelines could be amended to require consideration of disaster risk as a standard part of this analysis in hazard prone areas. This would contribute to the much needed strengthening of the body of knowledge in this area and ensure that individual investments address disaster risk sufficiently.
2.2.5	Understanding the triggers for greater investment in disaster risk reduction requires more studies. The Global Assessment Report (GAR, 2009) demonstrates the increase in investments in the well recognized post-disaster window of opportunity. Seed money has demonstrated trigger capacity for greater investment, particularly at a community level. Other potential innovative approaches should be explored. For example specific studies in countries that reflect the incremental cost of building safe schools and hospitals. This could be carried out by engineers in country to produce rough costing on strengthening the resilience of critical public infrastructure to specified safety standards. E.g. 5% increase cost on 'new' hospital and so much for retrofitting etc...
2.2.6	In most cases, Governments and local authorities will have taken different approaches to reduce risk including different types of investment, policies and incentives (e.g. government expenditure on safe infrastructure/maintenance, incentives for private investments that reduce risk, subsidy reform, and public procurement. This was confirmed in the recent World Bank/UN study on Economics of Disasters. Governments and local authorities should have an oversight of the broader set of option available to ensure the most effective use of public resources.
2.3 	Private sector engagement
2.3.1  	 Identifying the right narrative and marketing to get the private sector to recognize the opportunity to invest in risk reduction and climate change adaptation remains a challenge. A number of barriers remain. Research carried out by the Stockholm Environment Institute (SEI) on private sector engagement in climate change adaptation shows that there seems to be a latent interest in opportunities to undertake projects and conduct business in developing countries - not always driven from only profit motives. However, an important insight from this project is that private-sector interests and developing-country needs are not necessarily well aligned. Even though developing countries are already signaling needs for financial and technological solutions, various kinds of barriers prevent private interests from responding. Some are financial, for instance high transaction costs in accessing new markets. Others are related to non-financial factors such as country risk (which explains, for instance, why foreign direct investment in the developing world is heavily concentrated in a small number of countries), a lack of awareness about potential markets, or the need to change business models in order to reach poorer markets.
2.3.2	Some private sectors are already engaging. The insurance sector is perhaps furthest ahead in looking at adaptation to climate change, driven in part by a perception of its own exposure to risks. The finance sector has significant potential to generate and deliver new finance for adaptation, and some initiatives are already underway (e.g. SEB partnership with the World Bank), however there remains questions about whether the kinds of commercial finance available from private sources (e.g. debt) will build resilience against climate changes and contribute to sustainable development, or instead increase exposure to climate risks. Further work is needed to look at this question
2.3.3	Finally it was suggested to encourage the private sector to invest core product/service research and development funds in disaster risk reduction, rather than focusing on how to access corporate social responsibility financing.
2.4 	Data and information for making choices on disaster risk reduction financing
2.4.1	In the context of defining and quantifying natural hazard and climate change risk, how to ensure the appropriate quality control and relevance of the information for decision making. The Global Earthquake Model (GEM), while still at the early stages of its development, was presented as a good practice of harmonization of seismic hazard and vulnerability data. Such approaches need to be extended to other hazards. Challenge remains to have independent scientific assessment of quality, in particular in context of decision making and applicability in national and local planning processes.
2.4.2	Considerable amount of data and risk information is currently in private sector hands. In some cases, Governments also remain reluctant to share relevant data on different grounds. Open source mechanisms are required to make data and information more readily available for public utilization. Defining the incentives and steps required to drive such a process remains a potentially important function for public authorities, the UN and EC.
2.4.3	Additional efforts and research are required to assess countries level of risk and vulnerability to natural hazard and climate change. The multiplicity of methodologies and reports demonstrates the added-value of  related research in this field. The Commission has developed EU guidelines on risk assessment and mapping for disaster management and will also provide assistance for developing countries in this field.
2.4.4	The data that drives effective investment for reducing disaster risk needs to go beyond the existing emphasis on impacts on GDP. Broader understanding of development factors and indicators for economic growth and social well-being need to be integrated (as outlined  by the Communication  “GDP and beyond – measuring progress in a changing world” COM(2009)433 final.    
3.   	Opportunities for moving agenda forward
3.1 	The Hyogo Framework monitor is addressing for the first time disaster risk financing issues. Countries are recognizing the importance and usefulness of this self-assessment - 75 countries have so far provided reports for the next Session of the Global Platform, 3 to 8 May 2011. This constitutes higher figures at this stage in the process than previous years. This nationally led reporting mechanism has the potential to become an effective tool for increasing capacities of Government and other national stakeholders to build stronger understanding and capacity around financial mechanisms and budgetary models that reduce disaster risk. An in-depth review of the findings in the current reports should be carried out to guide the discussion at the upcoming Global Platform Session and recommendation shared with Governments for strengthening the indicators for future reports. Better integration with other reporting requirements, under global agreements such as the Multi-lateral Environmental Agreements (MEAs) and in particular climate change and desertification could reduce the reporting burden on Governments while increasing coherence between the topics.
3.2	The review of the EU Country Strategy Papers highlighted the current low level of recognition of the need to invest in disaster risk reduction. The Country Strategy Papers do present useful opportunity to guide effective investment in the future. Capacity and information requirements in countries can be jointly build up with the UN and Governments around the UNDAF and PRSP frameworks for which mechanisms are already being established to support integration of disaster risk reduction by UNISDR, UNDP and GFDRR.
3.3	UNISDR has started compiling experiences and good practices from Governments and local authorities in effective investments that reduce risk, through national and regional consultation with Governments. This effort could be enhanced and systematized based on outcomes of this expert meeting. The latest event where countries shared experience was a joint event with the Asian Development Bank (ADB) at the fourth Asian Ministerial Conference on Disaster Risk Reduction, dates 25 to 28 October 2010, Incheon, Korea.
3.4	Greater coherence and visibility of relevant studies can de developed using information clearinghouse such as prevention web. This includes the need for developing bibliographies and literature review. A number of studies are relevant for this area of work such as DARA that have compiled a set of indicator on national and local investments, while GAR has a study in two countries to look at the cost benefit of different types of investment (planning/retrofitting/risk sharing). The Mid-Term Review of the Hyogo Framework is looking at innovative local level financing of disaster risk reduction.
4.   	Next Steps
4.1	The preparations of the Global Platform for Disaster Risk reduction 3rd Session will require continued engagement if the experts and institutions involved in this meeting. The preparations will require a solid Background Note to guide the multi-stakeholder discussions at the Platform, based on an analysis of the report by Governments and a literature review. A further opportunity would be to compile good practices at national and local level to be presented at the Global Platform session.
4.2	Based on the outcomes of the 3rd Session of the Global Platform, suggested models of effective investments will need to be tested in a number of countries, including a continuous review of progress by countries through the HFA monitor and national country strategies and plans. These effective models will contribute to guiding and prioritizing funding flows such as national adaptation strategies.
4.3	Global and regional political opportunities will need to be seized such as the discussions on climate change adaptation under the UNFCCC, the Rio+20 preparatory processes and the recently established Global Panel on Sustainability. Relevant information sources and documents will need to be maintained.
4.4	Upcoming events of relevance include a Thematic Debate convened by the UN General Assembly President (Switzerland). Government and local authorities will be invited to share their experiences at this event and discuss with their piers.
4.5	Targeted dialogues will be required with donors, civil society, including the private sector. Monitoring of ODA will help target international support, while understanding of the business model for private sector investment will require a specific focus, starting in countries and regions and stronger research