Disaster resilience investment
Investment tools, resources, and processes that aim to avoid, reduce, and transfer risk, mitigate the impact of disaster, and fund resilience measures in infrastructure development, recovery, and reconstruction.
1. Disaster resilience investment includes investments made in corrective, prospective, reactive, and compensatory DRM actions. This covers expenditures towards disaster and disaster risk prevention (avoidance), mitigation, preparedness, response, recovery, reconstruction, and overall resilience building.
2. Disaster resilience investment depends on disaster resilience finance, a notion equivalent to Disaster Risk Finance (DRF).
3. Investment comprises expenditures in hard infrastructure as well as in nature-based solutions, and can include the promotion of behavioral change, including the development, enactment and control over laws, norms, and technical standards, as well as learning and capacity building.
4. Disaster resilience investment is to date dominated by immediate pre-impact and post-impact response, reconstruction, and recovery activities. Numerous mechanisms exist for this including emergency funds, insurance and reinsurance, contingent credits, loans, and national budgeting reallocations. Pre-impact corrective and prospective disaster risk reduction and avoidance investments are a very small part of total investment. A permanent but not yet heeded call exists for a significant increase in disaster risk mitigation and prevention spending.
5. Adaptation financing would be an equivalent seen from the angle of climate change investments.
FONDEN: A tool used by the Mexican Government to enhance fiscal resilience
FONDEN, Mexico’s fund for natural disasters, was established to support the rehabilitation of federal and state infrastructure affected by disasters. It comprises of two budget accounts: the FONDEN Program for Reconstruction and the FOPREDEN Program for Prevention. The former serves as the primary budget account to channel resources to reconstruction programs for rebuilding infrastructure, low-income housing, and natural environments. The latter funds activities related to risk assessment, risk reduction, and capacity building in disaster prevention. FONDEN is funded through the Federal Expenditure Budget, with the annual appropriation of no less than 0.4 percent of the budget. The FONDEN Trust holds these resources and makes payments for reconstruction services to implementing entities. The process for accessing and executing reconstruction funding from FONDEN balances the need for time-efficient disbursement with accountability and transparency concerns. It aims to prevent the recurrence of vulnerabilities by rebuilding infrastructure at higher standards and relocating public buildings or communities to safer zones. FONDEN's resources are leveraged with market-based risk transfer instruments.
Source: World Bank. (2012, May). FONDEN: Mexico's Natural Disaster Fund - A Review. Open Knowledge Repository. Retrieved February 14, 2023.