Although there is general agreement that investing in infrastructure resilience safeguards development gains from disasters and delivers long-term economic stability, mobilizing finance for resilience and harmonizing allocations optimally is not always easy. The Global Infrastructure Resilience 2023 (GIR23) report presents a comprehensive global analysis of the risks and estimated loss and damage of infrastructure assets due to a wide range of climate-related and geological disasters. The estimated global average annual loss is about $732 billion. These losses have important fiscal and debt implications for governments. For example, Dominica saw its public debt increase from 84 to 113 percent of GDP three years after 2017 Hurricane Maria. The debt-to-GDP ratio for Bangladesh is estimated to increase from 36.4% (in 2022) to as much as 39.2% after a 1-in-1000-year flood.  

The GIR25 offers a practical framework and good global experiences on how infrastructure agencies, asset owners and managers, and governments can mobilize finance to improve the resilience of existing and new infrastructure, while arranging contingent capital to respond to and recover from disasters. Today, most disaster finance flows are centred on the construction of new assets and on the response and recovery phases rather than on risk reduction.  The GIR25 proposes five recommendations for infrastructure agencies to mobilize and use, as cost-effectively as possible, financial resources for resilience: 

• Balance resources available across: (i) maintenance, (ii) retrofit of critical infrastructure assets, (iii) use of locally relevant resilience standards for new infrastructure, and (iv) repair and reconstruct damaged infrastructure fully and as fast as possible to reduce economic impacts. Some of the “invisible” measures like maintenance or selective retrofit can be the most cost-effective actions to enhance resilience and get the most economic benefits.
• As there will never be sufficient funding to do everything at once, use risk and economic assessment to prioritize actions among the four areas of resilience work of infrastructure agencies, as described above. Infrastructure agencies should concentrate on the most vulnerable assets and the ones that have the most economic impact if they are damaged by a disaster. The CDRI’s Resilience Cost Benefit Analysis tool can help prioritize resilience actions in new assets, as illustrated in the analysis for the FY19-25 India’s National Infrastructure Pipeline. This tool integrates hazard exposure, vulnerability data, and lifecycle cost modelling, demonstrating returns on resilience investments of up to 12:1. 

Figure 1. Layered landscape of infrastructure resilience financial instruments 

Note: Modified from Financial Protection Forum (2023). 

 Financing for resilient infrastructure requires a balancing act between maintenance for resilience, retrofitting old infrastructure, building stronger new assets, and completing rapid response and reconstruction of assets damaged by disasters. 

• No single financial instrument can solve all resilience problems. The GIR25 proposes a layered approach to gradually expand the financial mechanisms available to infrastructure agencies, as shown in Figure 1. First, specific funding allocations for new, stronger assets, maintenance, priority retrofits, and early warning systems can strengthen the capacity of infrastructure to absorb the shock of disaster. Second, contingency funds, credit lines, insurance, and international grants and soft loans can help mobilize the resources to respond and recover after disasters. 
•  Sub-national governments, like provinces and cities, need clear and transparent funding mechanisms and supportive policies to help local infrastructure agencies enhance their resilience. In Vietnam, for example, through recently developed legislation, natural disaster prevention and control funds are decentralized at the provincial level. Local contingency budgets of 2-4 percent of annual budgets have to be set aside and depleted first in an emergency before central federal contingency budgets can be used.
• The mobilization of private financing for resilient infrastructure through PPPs requires clear and transparent allocation of risks between the public and private parties. For lower-intensity, higher-frequency disasters – such as smaller floods or landslides impacting a tool road – the private party is better suited to absorb. For highly catastrophic disasters, the public sector should step in. For intermediate disasters, the risks, prevention, and solutions can be shared, and insurance instruments can help. 

As much as national governments, infrastructure agencies need well-defined financing mechanisms in a way that reflects their asset and risk structure. 

In conclusion, financing for resilient infrastructure requires a balancing act between maintenance for resilience, retrofitting, enhancing locally appropriate standards, and rapid response and recovery. A country can truly deliver resilience at scale by adopting a layered approach to disaster risk financing using a diversified set of complementary tools adapted to local contexts. 

By:

Alexandre Chavarot, Founder & Principal, Climate Finance 2050; Akaraseth Puranasamriddhi, DPhil Candidate in Climate Risks & Sustainable Finance, University of Oxford, United Kingdom); Neeha Mujeeb, Senior Programme Manager, Emerging Markets, Institutional Investors Group on Climate Change (IIGCC) 

This blog forms part of a series  under the ambit of CDRI’s second Global Infrastructure Resilience Report (GIR 2025). The main report, executive summary, and the corresponding working paper associated with this workstream are also available on CDRI's official website,  at: https://cdri.world/resilience-dividend/global-infrastructure-resiliencereport-second-edition/.