January 14, 2023

Reputation Arbitrage and ESG: Premium as of 13 January 2023

Steel City Re’s reputation metrics help demonstrate effective risk management and dutiful governance over mission-critical ESG. There are several equity portfolios that attest to the informational value of those metrics.

RepuSPX is limited to constituents of the S&P500 only. RepuVAR is open to all US market-traded companies, including non US-domiciled and ADRs, with market capitalizations greater than $1B. Both portfolios are constructed algorithmically; the latter is calculated by S&P/Dow Jones Indices. 

The RepuSPX portfolio was refreshed at the market’s close January 5, 2023. The RepuStars portfolio was refreshed at the markets’ opening, January 23, 2023.

A detailed analysis of the 20-year performance of RepuSPX and its ability to capture latent reputation value through 2022 (Jan 13, 2023 UPDATE) can be found as a link here.

Click on the image above to read more (No Paywall).

Steel City Re is an insurance intermediary and risk advisor for reputation value and ESG-linked reputation risk. We offer solutions for measuring reputational risk and reputational value, governance strategies for overseeing reputation risk management frameworks, insurance, and reinsurance. Reputation and ESG insurance and reinsurance are strategic instruments boards use to signal to investors, bond raters, and the courts (and regulators) that their governance processes are effective.

Reputation is Mission-Critical

A management program for ethics and compliance can forestall prosecution and mitigate fines. Similarly, oversight of “mission- critical” issues can forestall securities litigation. A program for reputation resilience, comprising both risk management and insurance (reinsurance)-authenticated oversight for all that is mission-critical, can create value in many ways. To this end, Steel City Re offers a Reputation Resilience Program.

Having a robust Reputation Resilience Program in place offers, amongst other benefits:

• Protection for the company, its staff, executives, and board from litigation and regulatory challenges
• Improved governance processes and better enterprise risk management protocols; i.e., measuring reputational risk
• Establishment of an agile operating, communications, and decision-making team, with clear roles and responsibilities, trained and ready to handle all reputational threats; i.e., a reputation risk management framework
• Proactive management of risks that could give rise to delays or derailing concerns around new product and strategic partnership launches
• Captured behavioral economic value from stakeholders; i.e., value of reputation
• Reduced costs of debt and risk transfer while boosting equity value; i.e., boosting reputational value

A hazard of reputation risk is a lurking gap between stakeholder expectations and reality. Another hazard is the emotional intensity associated with expectations. The peril is anger from disappointed stakeholders. This video and this written summary explain the behavioral economic features of the many perils of reputation risk.

Mitigating risk strategically through expectation management and operational adjustments evinces thoughtful management and dutiful governance. Financing such risks evinces prudence, and doing so publicly enables stakeholders to appreciate and value the effort. These comprise the core of Steel City Re’s professional services.

One Question

ESG-linked reputation risks are prevalent and material. Are you using insurance for ESG-linked reputation risk as part of your strategy to demonstrate thoughtful ESG risk management, compliance, and dutiful governance?