Kennedys is to receive government funding to develop software that aims to identify and assess reputational risk. Awarded through the Innovate UK programme, the law firm will work with a consortium of academics and industry professionals to develop a real-time index of any risk relating to an organisation’s ‘corporate citizenship’, measured through ESG elements and practices.

The £1.2m project will be part-funded by £783,000 from Innovate UK’s Smart Grants scheme. The remainder is understood to be covered by Kennedys and its fellow consortium members, the University of Manchester, University College London, Cicero/Amo and RiskCovered.

Kennedys said that while it recognises that reputational risk is broader than ESG mandates, it has chosen to focus on ESG in the recognition that ESG considerations are increasingly influential in private and public investment, as well as in consumer-spending decisions.

Sustainable supply chains, carbon footprints, charitable giving and the development of diversity and inclusion metrics are indeed all topics of increased scrutiny by the public and regulators.

Deborah Newberry, corporate affairs director at Kennedys, said: “The ongoing ESG momentum is likely to lead to a new chapter of reputational risk insurance. I expect to see a market shift in optimising existing products that add on reputational risk, such as D&O and cyber security; or towards initiatives that offer standalone coverage of reputation as a discreet hazard.

“However, insurance alone cannot be the solution. Firms must be able to accurately monitor and measure the impact of ESG-related events as part of an effective risk-management strategy. Current systems for building in reputational resilience are limited – largely because the data relied upon is unstructured, uncertain and incomplete."

Experienced project director Karim Derrick will oversee the development of Reputation Advisor over the next 18 months.

“The shift towards sustainable finance has gained pace in the last five years with assets managed by responsible and sustainable investors doubling to US$120trn and putting increasing pressure on businesses to develop long-term ESG strategies in order to access investment capital,” he said. “In a world where companies are often accused of greenwashing, Reputation Advisor will also provide robust and transparent evidence of a firm’s genuine green credentials. From an insurance perspective, the product will help insurers in their conversations with their own clients to quantify ESG related risk.

“Our technology work builds on that of our academic partners, combined with legal expertise, scaffolding human judgment for improved consistency. The benefits and opportunities are huge.”

Pictured: The Kennedys team

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