Breaking the cycle: The role of Disaster Risk Finance in the fight against disaster inequality
Author: Anna Svensson
Delegates attend the Exploring Loss and Damage event at Cop26 in Glasgow. Photograph: Justin Goff, UK Government
Anna Svensson, Policy and Strategic Partnerships Officer, has spent her career working in the not-for-profit sector and multisectoral collaborations. On this International Day for Disaster Risk Reduction, she reflects on the Centre's evidence workstream and how tackling disaster inequality underpins our focus on impactful disaster risk finance.
The topic for this year’s International Day for Disaster Risk Reduction, promoted by the United Nations Office for Disaster Risk Reduction is fighting inequality for a resilient future.
Disasters don’t impact us all equally. People already struggling with poverty and other forms of marginalisation are more likely to be exposed to hazards. They also have fewer resources to prevent and prepare for disasters, which exacerbates their impact and further increases inequality. The fight against inequality is a fight for resilience. And the fight for resilience must consider systemic inequalities at all levels to be successful.
Why talk disaster risk finance on the International Day for Disaster Risk Reduction
At the Centre for Disaster Protection our vision is for a world where disasters do not devastate lives. Disaster risk reduction is key to achieving this. But we are also realistic that while some risks can be reduced or eliminated, others can, at best, be managed. Disaster risk reduction and disaster risk finance are complementary. Disaster risk finance refers to the system of budgetary and financial mechanisms to credibly pay for a specific risk, arranged before a potential shock. This can include paying to prevent and reduce disaster risk, as well as preparing for and responding to disasters.
A disaster finance system steeped in inequality
The way we currently pay for disasters we have failed to prevent is fundamentally unfair and exacerbates inequalities at global, national and community levels. Our global disaster financing system is one of banks and begging bowls. Where disasters happens and those impacted have to rely on humanitarian support with no guarantee that it will come or take on unsustainable debt to pay for response and recovery.
It doesn’t have to be this way. It’s possible to put plans in place to ensure that money is available when it’s needed and that it reaches those who need it most. If done well, disaster risk finance has the potential to make the way we prepare and pay for disasters more equitable. Our evidence work is about better understanding the problems with the way disasters are currently funded, and learning from what works well, and what doesn’t.
Below we have pulled together some of our recent thinking and evidence on the role of disaster risk finance in breaking cycles of disaster exacerbated inequality.
Debt dilemmas in disaster aftermath fuel multi-level inequality
In the aftermath of disasters, countries with high debt burdens face difficult choices about whether to prioritise the needs of their citizens for response, recovery and general public services, or repaying their loans. With nearly half of the world’s poorest countries at risk of debt distress, there’s a real risk of deepening inequalities both within and between countries. So-called pause clauses, which allow countries to pause debt repayments in the aftermath of a disaster, can provide much needed breathing space.
Effective disaster risk finance focuses on poverty
Because disasters disproportionately affect the poorest people, disaster risk finance should be focused on the risks that impact people in poverty the most, and people who are at risk of ending up in poverty following a disaster. Focusing On Poverty: Reducing Vulnerability with Disaster Risk Financing provides guidance to help ensure that disaster risk finance is directed to those who are least able to withstand shocks, thus reducing the risk of worsening inequality as a result of disaster.
Inequalities matter when pre-arranging finance for disaster response
For International Women’s Day earlier this year, our Research Lead and gender specialist, Zahrah Nesbitt-Ahmed shared reflections on the need for better integration of gender equality and social inclusion in disaster risk financing instruments and what can be learned from similar efforts in relation to social protection systems. Disaster risk finance is not just about getting ‘money in’ – the money needs to reach people in need, which entails targeting, timing and access to payments, as well as monitoring and evaluating the process and outcomes. Increasing the coverage of social protection can make disaster risk finance more effective.
Accountability is crucial in tackling inequality
Accountability is a core principle for making DRF work for risk-affected people, reducing rather than reinforcing inequality. While the disaster risk finance sector is committed to accountability in principle, there is a lack of clarity around what it means and how it can be achieved. Based on our work, we define accountability as being responsible for using power and resources properly, taking into account the views of those affected by decisions and actions, and being able to be held to account for the consequences of those decisions and actions. And we have developed a framework that applies core elements of accountability to the specificities of disaster risk finance instruments.
The state of pre-arranged disaster finance
Our soon-to-be-published research on the state of pre-arranged finance has found that not only is the share of disaster finance that is arranged ahead of a disaster tiny (less than 3% in 2021), but that what pre-arranged finance there is, isn’t available to low-income countries who rely on humanitarian aid in the aftermath of disasters, further cementing global inequalities.
In the words of Gayle Smith, CEO of the One campaign, “We are at a real tipping point, in terms of how the world works going forward.” Our future can either witness the widening chasm between the rich and poor or the emergence of a more equitable global economy. The recognition of these issues is the first step towards change. By bridging gaps, avoiding silos, and bringing together the disaster risk reduction and disaster risk finance, we can work towards preventing disasters from devastating lives and economies – and towards achieving a more resilient future for all.