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Macroeconomic co-benefits of DRR investment: Assessment using the Dynamic Model of Multi-Hazard Mitigation CoBenefits (DYNAMMICs) model

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For the global community, the coming years present an unprecedented opportunity to achieve the twin goals of sustainability and resilience. This commitment has been reaffirmed by the greater convergence seen in several recently-agreed international frameworks including the Sendai Framework for Disaster Risk Reduction 2015-2030, the 2030 Agenda for Sustainable Development, and the New Urban Agenda - Habitat III, all of which aim for risk-informed development, safeguarding the world's most vulnerable against the anticipated impact of climate change.

Against this backdrop, the notion of ‘co-benefits’ or ´multiple benefits´ has gained currency in the field of disaster risk reduction (DRR). Unlike the traditional view, which frames DRR investment as that primarily aimed at the protection of assets, lives, and livelihoods, the emerging discourse emphasizes the potential positive spillover effects of DRR investment. Moreover, such spill-over effects are seen to influence societal welfare, regardless of whether disasters occur, significantly shifting our locus of attention to the greater alignment of DRR investments with broader societal goals of sustainability.

As will be reviewed briefly in this background paper, the conceptualization of DRR multiple benefits has thus been largely qualitative. One of the most widely adopted framings, ‘Triple Dividends’ (Tanner et al. 2015), presents a series of narratives in which DRR investment not only protects but also fosters growth and other societal welfare. However, it falls short of providing formal theoretical underpinnings and methods for quantifying such multiple benefits.

Given that the interaction of disaster risk with DRR investment and the macroeconomy is complex, the lack of detailed understanding regarding such dynamics limits our ability to effectively design a set of DRR investment options that yield synergies between DRR and other development aspirations. Our GAR 2022 contribution is, therefore, aimed at bridging this important knowledge gap and introduces a new macroeconomic framework for quantifying the multiple benefits of DRR investment.

This complexity of the relationship between disaster risk, DRR investment and macroeconomy is hardly straightforward. Different types of DRR investment have vastly different profiles in terms of their capacity to foster the 1st, 2nd and 3rd dividends over time. Such dynamics are functions of both biophysical and economic factors, including but not limited to the prevalent levels of disaster risk prior to DRR investment, the extent of required capital (how this could potentially affect private investment) and other underlying socioeconomic drivers such as continued urbanization and therefore an increase of exposure.

This article is organized as follows: section 2 provides a brief overview of the literature on DRR multiple benefits, primarily focused on narratives behind the triple dividends of DRR. Section 3 then introduces the newly developed theoretical macroeconomic model known as the Dynamic Model of Multi-hazard Mitigation CoBenefits (DYNAMMICs) framework, discussing its theoretical underpinnings. Section 4 calibrates the DYNAMMICs model to the case of flood and drought risk reduction investment appraisal, using available data from Tanzania and Zambia. Section 5 then discusses major policy implications of our analysis.