Bonds for disaster resilience: A review of literature and practice

Climate change is worsening the severity and increasing the frequency of certain hazard events, thus requiring more financing for disaster mitigation or climate change adaptation. A wide range of financial tools is emerging to finance projects reducing hazard impacts on communities. Several of these tools have resilience bonds in their titles, and one is specifically known as Resilience Bonds. To evaluate the utility and effectiveness of new financing tools, we studied various available financial mechanisms for raising funds for disaster management and resilience projects. In this paper, we provide a comprehensive review of the literature and application of financial tools in enhancing community resilience against weather-related disasters since 2000. We also present findings from our interviews with finance and bond experts to unpack the existing trends in financing disaster resilience projects. Our review of the application of issued and proposed bonds with resilience goals shows that these bonds have various project scopes, with most bonds utilized for financing flood and hurricane resilience measures. Additionally, in the reviewed literature, bonds with resilience goals are primarily issued by government entities, indicating a substantial gap and opportunities for the private capital market to invest in disaster resilience.