Financing disaster risks – Lessons from the Bogota exchange

Celebrating its second anniversary, Colombia Humanitaria gathered national stakeholders and international representatives in a knowledge exchange around Disaster Risk Management (DRM). Held in Bogota on 22 and 23 November 2012, the event aimed to systematize lessons learned within Colombia Humanitaria, set up in 2010 by the Colombian president to respond to the devastating effects of La Niña and mandated to coordinate recovery actions until end-2013. The event also provided an opportunity to share experiences with other countries suffering from even more frequent natural disasters, including Ecuador, El Salvador, Dominican Republic, Indonesia, Japan, Mexico, Thailand and the United States.

Working session at the Bogotá knowledge exchange on DRM

Among the key messages from the Bogota exchange, institutional capacities and financing models were highlighted as critical pillars for effective DRM in its basic phases (before, during and after disasters). In practice, DRM is intimately related to climate change adaptation (‘prepare for climate change effects’). Beyond semantic distinctions, the clock for communities, private business, and the public sector is already ticking in many countries to cope with increasingly violent natural disasters.

Indeed, future DRM actions might increasingly have to rely on climate finance as Official Development Assistance (ODA) is being cut and governments around the world are streamlining their efforts in climate change, DRM and sustainable development. One example is Indonesia, where the government has committed 30% of climate finance to DRM, while DRM is mainstreamed in medium- and long-term development plans.

In this line, the Bogota knowledge exchange provided a first entry door to explore the connection points between DRM and climate finance. On the one side, Colombia Humanitaria is systematizing its lessons on how to institutionalize DRM, while also reviewing experiences in Indonesia (2004 Tsunami), Mexico (2010 multiple disasters including earthquakes and hurricanes), Thailand (2011 Mega Floods), and the United States (2005 Hurricane Katrina) through case stories. On the other side, countries such as Colombia, El Salvador, Honduras, and Peru have started to review their climate finance readiness from the institutional and operational lens, as part of a dynamic learning process around climate finance barriers, launched in the Latin American and Caribbean Dialogue on Effective Climate Finance, held in Honduras in May 2012.

Drawing on this rich menu of insights, how can DRM finance become more effective? Here are some answers:

  • Countries need to invest into institutional capacities to prepare, respond and recover from natural disasters. Good practice on institutional disaster response is already available in temporal platforms such as Colombia Humanitaria or Indonesia’s Agency for Rehabilitation and Reconstruction (BRR), both of which are examples of organizational excellence (including leadership and staffing), efficiency, transparency and accountability under very complex conditions. Drawing on climate finance lessons, further analysis is needed to fully understand the implications to access, manage and account large-scale external financing for DRM.

Plenary session on prospects to further knowledge exchange in Colombia and across countries

  • Inter-institutional coordination is needed to improve public sector action on the overall DRM cycle, from preparation to reconstruction. For example, Colombia might explore synergies between its National Systems on DRM and Climate Change, both acting as separate intra-government coordination platforms in their respective areas. This should enable the government to institutionally anchor DRM in the climate change adaptation agenda.
  • In parallel with climate finance, DRM finance is struggling with a highly fragmented labyrinth of financing sources and mechanisms, as well as dispersed donor communities. Both Colombia and Indonesia have early experience in coordinating donors. However, much remains to be done, and in line with experience in El Salvador, both DRM and climate change might learn from valuable experience in effective ODA management.
  • DRM finance is already diversifying its menu of financial instruments. Governments have moved from projects to funds. Examples include Colombia’s DRM and Adaptation Funds (worth 2.9 billion and 4.9 billion USD, respectively), Mexico’s Natural Disaster Fund FONDEN (5.3 billion USD) and the recently launched Regional DRM Fund in Central America FOCEGIR (24 million USD in kick-start phase). However, the focus of national funds is almost exclusively on disaster response and reconstruction, leaving preparedness largely unfunded.
  • In view of increased disaster vulnerability, Ministries of Finance (MOF) of several countries have launched or are working on Risk Financing Strategies, for which the G20 has recently provided a framework (more here). MOF are interested in more accurate economic and fiscal assessments before, during and after disasters. For example, according to CEPAL, Colombia’s response to La Niña became an economic stimulus exceeding the damages and losses.
  • In the context of Risk Financing Strategies, MOF are also working on innovative instruments such as catastrophe bonds (CAT bonds), which transfer the disaster risks to capital markets and help secure much-needed financial liquidity in disaster situation. Capturing a total of 400 million USD in two subscription rounds (2009 and 2012), Mexico is a pioneer in issuing these bonds, which are supported by the World Bank MultiCat platform (see pdf), and backed by national and multinational insurance companies. Many middle-income countries, including Colombia and Indonesia, have expressed interest in similar models which require a strong legal and institutional framework, as well as accurate data and statistics about the probability and severity of catastrophic events.

Stakeholders involved in climate finance can already provide innovations and learning on effective policies, institutions and financial management, which might feed into the emerging debate around DRM finance. Connecting DRM and climate finance will become critical for all countries, especially for those with limited fiscal margin and increasingly unsustainable climate external debt.

Risk Financing Strategies, and the emerging work on insurance and risk transfer instruments, will enable MOF to include climate vulnerability and disaster proneness in financial and budgetary planning, reducing climate-related fiscal stress. And indeed, from a public finance perspective, these strategies could help synchronize DRM and climate change adaptation, as one of the most urgent tasks at the country level.


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South-South Cooperation Exchange Mechanism. First online portal dedicated to SSC for sustainable development.

Mapping Multilateral Support to South-South Cooperation in Latin America and the Caribbean: Towards Collaborative Approaches. UNDP, 2011. Download PDF (English version) (Versión en Español)


IDB  Magazine - Regional Public Goods: An innovative approach to South-South Cooperation, 2014 version here in English and Spanish.

Using Knowledge Exchange for Capacity Development: What Works in Global Practice? KDI and The World Bank Institute



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