Preparing for climate-related catastrophes beats focusing on recovery alone

Published by: Allstate, US Chamber of Commerce & US Chamber of Commerce Foundation

Each $1 invested in disaster preparation saves $13 in economic costs, damages, and cleanup

Executive Summary

The U.S. experiences a multitude of disasters each year. The cost of cleaning up and rebuilding destroyed homes, businesses, equipment, and infrastructure is immense and growing. In 2022 alone, the cost of natural disasters exceeded $360 billion across the globe, including more than 40 weather events causing over $1 billion in damage.

Investments in resilience and preparedness can reduce the cost of damage after a disaster. An accepted ratio is that $1 of investment reduces the damage and cleanup costs of a disaster by $6. What is less known—and what this study set out to find—is how investments in resilience and preparedness impact a community’s local economy, including jobs, workforce participation, production (GDP), and earned income for residents.

The Climate Resiliency Report from the U.S. Chamber of Commerce, Allstate, and the U.S. Chamber of Commerce Foundation shows that investments in resilience and preparedness can substantially reduce the economic costs associated with disasters. The study revealed that each $1 of investment in resilience and disaster preparedness reduces a community’s economic costs after an event by $7. That’s the median ratio for the 25 disasters modeled as part of the study.

That $7 of savings for economic costs is in addition to the $6 of savings for damage already assumed in our model. Combining the two ratios finds that every $1 invested in resilience and disaster preparedness saves $13 in economic impact, damage, and cleanup costs after the event.

$7 + $6 = $13

Amount saved in economic impact and cleanup costs for every $1 invested in resilience

Five of the 25 disaster scenarios that we modeled and analyzed are described below. They range in damage and cleanup costs from $1 billion to $130 billion and involve communities of different sizes across the country.

Each scenario highlights the jobs saved, workforce preserved, and economic savings that would come from investing up-front in resilience and disaster preparedness programs and resources. This is true in larger metropolitan areas as well as smaller rural areas and towns. It is also true for more severe major disasters and less severe events.

For example:

• $10.8 billion of investments in resilience and preparedness for a Category 4 hurricane striking Miami would prevent the loss of about 184,000 jobs and save about $26 billion of production and $17 billion of income.
• $833 million of investments in resilience and preparedness for a major earthquake striking San Diego would save about 38,000 jobs. The amount of production and income saved would be about $5.8 billion and $3.3 billion, respectively.
• $83 million of investments in resilience and preparedness for a serious tornado hitting Nashville would save more than 5,300 jobs. The amount of production and income saved would be more than $683 million and $464 million, respectively.
• $83 million of investments in resilience and preparedness for a drought/heat wave in Redding, California, would save 474 jobs, keep $67 million of output, and preserve more than $31 million of income in the area.
• $83 million of investments in resilience and preparedness for a major wildfire in Santa Fe would save 388 jobs, keep almost $45 million of output, and preserve more than $20 million of income in the area.

Investments in resilience and preparedness won’t prevent losses, but they can significantly reduce them. This has economic benefits for a community in terms of both continued economic growth and income. It is vital that community members, small business owners and decision makers at every level have a firm grasp of how such investments can substantially reduce the economic costs of disasters. This study is one small step in that direction.