Positive Externalities in the Polycrisis: Effectively Addressing Disaster and Climate Risks for Generating Multiple Resilience Dividends

Abstract

With multiple risks interacting and shocks proliferating across geographies and sectors, the concept of polycrisis has come to the fore. Polycrisis describes interwoven and overlapping crises that cannot be understood or resolved in isolation. Analysts have suggested that many of the Polycrisis symptoms have been at least partially triggered by negative externalities, that is, costs arising from economic activity that are not covered by market prices and thus not internalized in national and international decision making, leading to suboptimal decisions on climate action, energy and food security, global financial stability, among others. Externalities have generally been framed as negative. Positive externalities, that is, societal benefits that indirectly arise from activities and transactions have less often been considered. International policy debate on disaster risk reduction (DRR) and climate change adaptation (CCA) over the last years, as stipulated by international compacts in 2015 (the Sendai Framework, the SDGs, and the Paris Agreement), has built on positive externality discussion, albeit not explicitly so. Disaster risk reduction and CCA analysts have emphasized the need for orienting risk management investments towards interventions that generate so-called multiple or triple resilience dividends. This means extending the focus in decision making from avoiding and reducing impacts and risks to also considering development (co-)benefits arising irrespective of disaster event occurrence. In this context, the “Triple Dividend of Resilience” (TDR) concept and framework has suggested that in addition to risk reduction benefits (dividend 1), dividends would also arise from benefits associated with unlocked development (dividend 2) as well as from co-benefits (dividend 3), for example, from investments into disaster-safe and energy efficient housing. Yet, despite the increasing burdens imposed by systemic disaster and climate risks and wide-spread recognition of this concept over a decade as well as solid evidence regarding the benefits of reducing risk, it has remained difficult to motivate sustained investment across scales into disaster and climate risk reduction. We argue that this systemic underinvestment is, at least partially, due to a lack of conceptual clarity of the TDR with regard to the framing around the dividend 2, a lack of awareness and solid evidence on the positive externalities, as well as interrelationships between resilience dividends in space and time. Based on a snowballing review of the limited literature on the TDR as well as an examination of empirical and model-based evidence, we present the state of the art on the TDR framework. We examine the various dividends in terms of epistemological and methodological contributions building on empirical and modeling methods for supporting decision making as well as evidence for decision making across scales from local to global. Overall, we suggest that there indeed can be positive externalities and solid co-benefits from disaster and climate risk reduction. Systemic risk research and practice coupled with resilience dividend reasoning may thus help to better identify those dividends for improved decision making on disaster and climate risk (reduction). We further show how analysts and decision makers may better consider those various resilience dividends beyond the reduction of losses as well as assess dependencies in risk and benefits’ creation across micro and macro scales. As we suggest, enhanced methods and better awareness for potential externalities may enable more comprehensive consideration of DRR and CCA interventions with benefits arising at various scales. This may eventually also lead to enhanced disaster risk and climate risk governance, which is key for tackling relevant risk challenges in a polycrisis context.

Keywords

Decision making / Polycrisis / Positive externalities / Systemic risk management / Triple Dividend of Resilience

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