The new year has seen Cognito U.S. engaged across a wide range of campaigns and issues for clients. A few themes stand out.
Firstly, the small demonstration by self-proclaimed meme-stock types outside the SEC offices in January was trite, but highlighted the breadth of the SEC’s activism under Gary Gensler. The current SEC agenda includes substantial market structure reforms, changes to fund marketing rules, changes around fund naming, cybersecurity, and ESG labelling and disclosures, and a new tailored fund reporting regime. No fewer than two dozen proposals are to be finalized in 2023, all with the aim, in the SEC’s view, of protecting investors, especially the retail investor. Many of these proposals can be critiqued around cost and complexity - with the argument that unintended consequences ultimately play out negatively for the investor. Much time and money are being spent by the investment industry around these issues, with everyone keen to talk about the public good and avoid any appearance of being self-serving.
In financial services communications, this has translated into considerable media and other communications activity as companies seek to put their case, seize business opportunities from new and changed rules, and get ready to handle potential risks from changing investor behavior. It’s keeping Cognito busy, and of course more regulatory concentration on crypto is thundering towards us.
Secondly, “higher for longer” is in the driving seat of the markets, as reaction to last week’s disappointing core inflation figures underlined. But while the impact of the Fed policy on public markets is transparent, the implications for today’s huge private markets is taking longer to percolate. We’re seeing activity around communicating down rounds and lower valuations, but so far, any sustained media interest in potential credit deterioration is hard to spot. Certainly, fintech funding has had a tough 12 months; according to TechCrunch deal volume was down 50%, but average deal size only 9%, so suggesting a market correction not a bust. Positive pockets exist: Insurtech M&A exits surged in 2022 in a clear sign we’re deep into an insurance hard market cycle. Overall, it feels like the showdown between the mountain of available private capital “dry powder” and the negative impact of higher rates is still to come. We just know from the past that when the tide changes, it can be inexorable and rapid.
Thirdly, the massive climate package in the Inflation Reduction Act is so comprehensive that it remains a major, multi-faceted business story, six months on. We see it only picking up further momentum, fuelled by investment announcements (over 100 so far) and organised communications and marketing campaigns by advisors, lenders, VCs and corporates. A recent FT article, for example, covered the prospects for a new tradable market in climate tax credits, along with new insurance products if the value of the tax credit is impaired. Everyone is pedalling hard to position themselves around this climate funding, in an environment where most of the business media (with the exception of the WSJ Opinion pages and National Review) is remarkably positive about the IRA. If “The Graduate” was re-made today, Dustin Hoffman might be advised to get into climate comms, not “plastics”. Being less flippant, the self-evident seriousness of climate communications appeals to many staff in Cognito and no doubt across the communications industry. We aim to match that enthusiasm with ongoing staff development on the issues and (a little bit of) the science needed to do high quality work in this field. Expect more updates.