Forecast-based financing: an approach for catalyzing humanitarian action based on extreme weather and climate forecasts

Abstract. Disaster risk reduction efforts traditionally focus on long-term preventative measures or post-disaster response. Outside of these, there are many short-term actions, such as evacuation, that can be implemented in the period of time between a warning and a potential disaster to reduce the risk of impacts. However, this precious window of opportunity is regularly overlooked in the case of climate and weather forecasts, which can indicate heightened risk of disaster but are rarely used to initiate preventative action. Barriers range from the protracted debate over the best strategy for intervention to the inherent uncomfortableness on the part of donors to invest in a situation that will likely arise but is not certain. In general, it is unclear what levels of forecast probability and magnitude are "worth" reacting to. Here, we propose a novel forecast-based financing system to automatically trigger action based on climate forecasts or observations. The system matches threshold forecast probabilities with appropriate actions, disburses required funding when threshold forecasts are issued, and develops standard operating procedures that contain the mandate to act when these threshold forecasts are issued. We detail the methods that can be used to establish such a system, and provide illustrations from several pilot cases. Ultimately, such a system can be scaled up in disaster-prone areas worldwide to improve effectiveness at reducing the risk of disaster.