2022 year-end asset management updates

Asset management’s 2022 year-end webinar provided an update focusing on the current state of the industry and an economic outlook. The webinar included trending topics in the industry such as digital assets, environmental, social and corporate governance (ESG), tax changes and cybersecurity, which members of the Baker Tilly team discussed in detail. John Basile, Principal and asset management team leader, moderated the event.

• Chris Tait, principal, led things off by diving into digital assets. The dominate coin in the market is down 75% from its all-time high and down 66% in the last 12 months. Along with bitcoin, ethereum is also down 75% from its all-time high. There has been a significant market value deterioration of cryptocurrency during the year. Stable coins don’t have an associated volatility like most coins and, as such, have become a major share of the market with five of the top 15 cryptocurrencies being stable coins. Bitcoin price does not necessarily correlate to market activity. Still, major players, including BNY Mellon and U.S. Bank, are coming into the digital asset space with custody platforms. On the regulatory landscape, bills are working their way through Congress to provide more clarity in 2023 regarding oversight over crypto exchanges.
• Joe Donnelly, principal, provided insight on ESG-related issues. Building a sustainable organization by developing a strategy and response to ESG should involve all departments across an organization. To help mitigate and manage climate change risk, organizations should follow three steps: identify, evaluate and quantify. Identify the climate change risks applicable to the organization and the impact to financial statements. Evaluate any plans to reduce climate-related risks including a description of the risks impact on strategy, business model and outlook. Quantify the expenditures to mitigate climate change risk, decrease greenhouse gas emissions and pay for climate change strategy-related costs. In building sustainability, an organization needs to assess the current state of sustainability efforts and evaluate what topics and initiatives are most relevant to the organization. Organizations should be aware that tax credits and preferences were created to encourage organizations to invest in ESG projects.