Stay connected with IIX to receive the latest impact investing news and information on upcoming courses and events.
7.8 on the Richter Scale
50 seconds of devastation
8,800 lives lost and 23,000 injured
30 million people affected in the aftermath
$10 billion required to rebuild Nepal after the Gorkha earthquake
The devastating earthquake that shook the nation on April 25, 2015 left homes flattened, roads destroyed and families struggling to survive. Needless to say, it came as a critical setback to the government’s goal of transitioning from a ‘least developed’ to a ‘developing country’ by 2022 – a goal that would have mandated an ambitious 8% annual growth rate. The aftermath of the crisis saw governments, donors and INGOs from across the world locked in a race against time to save lives and accelerate disaster recovery efforts. Along with the United Nations, several governments including the United States, United Kingdom, China, Norway, Japan and Australia have already deployed over $350 million in funding for relief efforts. Non-profits such as Red Cross and Save the Children deployed thousands of volunteers on the ground bringing hope and support to the victims and corporations like Coca Cola and Pepsi are providing other critical supplies like food and water. [To support the continued relief efforts, click here.]
Natural calamities in developing and politically paralyzed nations such as Nepal often escalate into catastrophes, one disaster igniting another for years or even decades upon end. The ripple effects from the earthquake triggered a chain reaction of seemingly unrelated problems: a surge in child trafficking, increased labor cost and decreased availability of labor, rising rental and property cost burdens, inflated public debt burdens, a badly hit tourism industry as well as severe healthcare system damages. The estimated cost to rebuild the country as per Nepal’s – $ $10 billion – is almost half the nation’s current GDP, as per Finance Minister Ram S. Mahat.
- ADAPTATION & PREPARATION: the Public Sector in earthquake-prone Japan serves as an epitome of how governments can create inbuilt resilience mechanisms by recognizing a simple fact: earthquakes don’t kill people, buildings do. The Gorkha earthquake was a rigorous test to Nepal’s 23 year effort to build or retrofit earthquake-resistant structures, revealing that enforcement of its seismic code has been highly fragmented as per earthquake-hazard specialists. Rebuilding a resilient nation would mandate a conscious effort at the policy level by the government of Nepal to enforce stringent building codes especially on hospitals and schools (vital post-disaster infrastructure). Part of this will be supported by President Kerry’s $130 million pledge to help Nepal ‘build-back-better’ and USAID’s programs to train Nepalis to rebuild seismically-stable buildings going forward.
- PREPARATION & RESPONSE: the Private Sector is playing a role by supporting the development of technology that can be used to trigger an early earthquake detection signal via smartphones. This could serve as an affordable, life-saving mechanism to millions of people who would otherwise be caught off guard. This could be critical for developing countries like Nepal with limited resources to invest in state-of-the-art seismology equipment or public information systems. Corporates also played a role on the response side. Microsoft offered free Skype calls to enable critical communication during the crisis and Google and Facebook created online tools such as Person Finder and Safe Check to equip the community to deal with the disaster in a quick and cost-effective manner.
- RESPONSE & ADAPTATION: Third Sector is playing a role with organizations like Oxfam going above and beyond relief to support Nepal’s Disaster Risk Reduction (DRR) activities including community training on first aid, search and rescue, establishment of early-warning systems and involvement in district planning processes to build awareness of disaster preparedness plans. As per Oxfam: ‘Even prior to the earthquake, half of Nepal’s population lived below the poverty line. Their ability to cope with a major disaster is crippled by the lack of economic and social infrastructure. The process of rescue, recovery and eventual reconstruction effort needs to ensure that this is a priority so that local communities and the state have enough assets to fall back on.’ Oxfam has already supported over 270,000 people post the earthquake and has committed an additional $56 million over the next accelerate the recovery process.
- TRANSFORMATION: There is a fourth way to align diverse stakeholders from working in silos to collaboratively achieve common outcomes and effectively transform Nepal’s post-disaster landscape. Impact Investing can play a pivotal role in creating sustainable and scalable long-term resilience via innovative financial instruments designed to effectively mobilizing private capital to solve development challenges. For instance, Impact Investment Exchange Asia’s (IIX’s) Humanity Bond (HB) – a publically listed debt security – can be sold to impact investors whose proceeds fund the immediate cost of high impact programs that invest in preventative measures and build systemic resilience to shocks and stresses. The bondholders are then repaid over time by the bond issuer through pledged/committed funds and or payment from revenue streams. Having funds available upfront to invest in resilience mechanisms (from earthquake detection devices to seismically-stable infrastructure) would have a higher impact on the lives of more people at risk and address the root cause of the problem. Investing in resilience today would also reduce the larger future outlays of capital that would be required to fund more reactive strategies (such as relief, reconstruction or rehabilitation) which are considerably more expensive and often, less effective.
It is imperative for Nepal to use Gorkha earthquake as a stepping-stone towards realizing that investing in resilience can prevent disruptions from cascading into disasters. The nation must seize this opportunity to redefine the dominant narrative of reactive disaster recovery by using innovative new mechanisms to evolve from a story of relief today to the epitome of resilience tomorrow.
Business Development & Partnerships