Disaster risk management. Green bonds and CAT bonds, the key instruments for the prevention and the mitigation of the effects of Climate Change.

Abstract

Nowadays Disaster Risk Management has become a necessity for many countries, especially due to the aggravation of the effect of Climate Change. The main objective of this thesis is to illustrate the basis of disaster risk management, focusing on the importance of the pre disaster phases: prevention and preparedness. Subsequently, this thesis will introduce two financial instruments, which are extremely significant for the improvement of the prevention and preparedness phases of the Disaster Risk Management cycle: Green Bonds and Catastrophe Bonds. Firstly, an overview of the practice of Disaster Risk Management will be illustrated, starting from the definitions, the origins and development of the sector in general. Then disaster risk management cycle, the main impacts and the possible pre- and post-disaster remedies will be discussed. Afterwards, two main instruments will be introduced and examined in detail. The first instrument is represented by green bonds, which exemplify a prevention policy, while the second corresponds to catastrophe bonds, representing a way to improve the preparedness of a country. Finally, the approach of Japan to Disaster Risk Management will be analysed, with a special focus on how this country make use of green bonds and catastrophe bonds.