UBS is first to make sustainable investments the preferred path for clients of its $2.6 trillion wealth management business


UBS Group, which manages $2.6 trillion in assets for some of the world’s wealthiest people, will now advise private clients to opt for sustainable investments over more traditional options when appropriate, the first major financial institution to do so.

While traditional investments will remain most suitable in some circumstances, UBS
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  believes a 100% sustainable portfolio can deliver similar or potentially higher returns compared to traditional investment portfolios and offer strong diversification for clients investing globally, the company said Thursday. Year to date, major sustainable indices have performed better than traditional equivalents, in some cases because of falling oil prices
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  as the global economy softens under the impact of COVID-19.

In fact, the timing of the UBS announcement is linked to wider adoption of the “build back better” mindset favoring sustainable practices as the global economy recovers from the pandemic.

“COVID-19 has put the exclamation point on one of the most important shifts in financial services in a generation,” said Tom Naratil, co-president of UBS Global Wealth Management and president of UBS Americas. “The pandemic has brought the vulnerability and interconnected nature of our societies and industries to the forefront of investors’ minds and shown that sustainability considerations cannot be ignored.”

Still, clients will remain in the driver’s seat, UBS said.

“Clients will have an ample set of choices and, in conversation with their advisor, will be able choose the approach that best fits their need. They may opt to include sustainable solutions alongside traditional ones in their existing portfolios, or switch to a completely sustainable asset allocation, or stick to traditional investments if that is their decision,” said Andrew Lee, head of sustainable and impact investing at UBS Global Wealth Management.

UBS clients currently have nearly $500 billion invested in its “core” sustainable assets, such as green bonds and low-carbon index funds, according to company data.

The U.S. Commodities Futures Trading Commission, banks, investment managers and investors themselves this week released a groundbreaking call for unified regulation in the U.S. around sustainability investing and called for a carbon tax; the U.S. has largely lagged Europe in getting financial agencies on side when it comes to climate-minded investing.

“As consumer preferences and policy goals shift towards sustainability, new revenue opportunities are created for more sustainability-focused companies,” said Lee. “Robust sustainable investments incorporate these sustainability considerations into the analysis alongside traditional metrics such as valuations or earnings growth, thus granting investors a broader, more holistic view of factors that can impact performance of investment portfolios. Therefore, rather than seeing them as tradeoffs, from a pure financial return perspective, we view these two goals as being in lockstep.”



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Tents fit for a wedding reception and artfully constructed wooden bandstands: Welcome to outdoor classrooms during a pandemic — and now for the bad news


It didn’t take a pandemic for Sharon Danks to recognize the benefits of outdoor learning.

In fact, she started researching the environmental, physical and mental-health benefits of outdoor learning more than two decades before founding the nonprofit Green Schoolyards America seven years ago.

Before the pandemic, Danks partnered primarily with individual schools in districts near Berkeley, Calif., where the organization is based.

The pandemic, she said, has only strengthened the case for outdoor learning nationwide, especially given the amount of scientific research suggesting that the outdoors is less hospitable to the coronavirus than indoors where air circulation is significantly more limited.

See:Two teachers face a difficult choice: One welcomes ‘normalcy,’ while another feels ‘rage,’ and COVID-19 has radically altered feelings about school for both

The U.S. Centers for Disease Control and Prevention recommends that schools “consider using outdoor space, weather-permitting, to enable social distancing.” The agency specifically recommends having lunch outside in place of in a communal cafeteria or otherwise eating within classrooms.

Dr. Anthony Fauci, who heads the National Institute of Allergy and Infectious Diseases, has also urged schools to find ways to offer as many outdoor activities as possible. “Get as much outdoors as you can,” he said in a Facebook
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live event in August. “If you look at the superspreader events that have occurred, they’re almost always inside.”

The American Academy of Pediatrics echoes Fauci’s views also urging schools to “utilize outdoor spaces when possible.”

Some schools have even built wood bandstand-like structures in the grounds to provide children with outdoor spaces.

Weather permitting, others have opted for tents that look more like they’re going to welcome wedding guests instead of children and teachers. Another school simply uses a circle of tree stumps.

“Nature is something that has been proven to decrease stress levels, and, during this pandemic, there has so much stress and trauma,” Danks said. What’s more, not all school buildings have enough space for children to maintain the recommended six feet of social distance.

“Outside not only do you have air that isn’t recirculating, but kids don’t have to stay in assigned seats all day and can actually move around,” she said.

Many schools recognized that back in March when they shifted to virtual instruction and reached out to Danks inquiring about how they, too, could create outdoor learning environments in preparation for the fall.

The overwhelming amount of inquiries she received led her to partner with three other nonprofits to form a National COVID-19 Outdoor Learning Initiative that provides schools with templates for how to construct an outdoor classroom, lesson plans and other tools with the support of more than 400 landscaping, design and educational volunteers.

One problem she noticed: “The bigger the institution, the longer it takes to change direction. Smaller schools such as single-district public schools and independent nonprofit private schools are doing this much more quickly because they don’t need to ask for permission.”

Not all schools have parent-teacher associations

But school size isn’t the only thing holding back schools from building outdoor classrooms in parts of the country where in-person learning is allowed to take place.

For children with special needs, for example, an outdoor learning environment poses a slew of problems, said Mindy Rosier-Rayburn, an elementary special-education science teacher at the Mickey Mantle School in New York City.

As of Friday nearly 800 schools in the city were approved to offer outdoor learning.

The New York City Department of Education did not respond to MarketWatch’s request for comment regarding efforts to level the playing field for lower-income schools that would like to offer outdoor learning, but can’t because they lack the funds to do so.

When Mayor Bill de Blasio gave city public schools the go-ahead in late August to offer outdoor learning in streets and parks near schools, Rosier-Rayburn recognized that there would be a “glaring equity issue” for schools in higher-income neighborhoods versus lower-income ones like the school district she teaches at, in Harlem.

“The comments I heard early on were that PTAs can help pay for these things,” she said, “but my school doesn’t even have a PTA, and there are so many others that don’t.”

“We are a Title 1 school,” she said. This type of school typically has a high concentration of children from low-income families and receives federal grants. All students attending Mickey Mantle School qualify for free lunch, she said.

When Rosier-Rayburn started teaching science remotely in the spring, she said, “I didn’t even feel comfortable asking parents to get supplies to do science experiments. If the experiment involves something I think they had at home, I tried to do that.”

Even if Rosier-Rayburn’s school had access to funds to purchase tents and other outdoor items, it would be a nightmare for her and her fellow teachers.

“We have several children who are runners, and that terrifies us. In a building you can control the situation, but outside you can’t,” Rosier-Rayburn, who has been a special-education teacher for nearly 24 years, told MarketWatch.

“We’re always on guard — just like when people enter a room they look for the exit and nearest bathroom, we constantly have to think: What could a student possibly hurt themselves with? That’s why outside learning is the worst idea.”

Additionally, she said several autistic students “could have sensitivity to sounds like honking horns.” Another concern: Some children “tend to put everything in their mouths.”

Plans are still up in the air for the upcoming school year, which in New York City is slated to begin on Sept. 21 after the school date was pushed back when the United Federation Teachers, a labor union composed primarily of public school teachers, threatened to strike over safety concerns relating to in-person learning.

For all of the above reasons, Rosier-Rayburn said she’ll continue teaching remotely, since she has received a medical accommodation to do so.

(The UFT did not respond to MarketWatch’s request for a comment.)


Cara Sclafani, a parent of two children who attend P.S. 185, a New York City Title 1 public elementary school, also located in Harlem, has health-related reservations about even sending them back for partial in-person learning certain days each week during an ongoing public health crisis.

As co-chair of the District 3 Green Schools Group, a coalition of parent volunteers who represent Manhattan’s Upper West Side and parts of central Harlem, advocating for outdoor education, Sclafani has advocated outdoor learning as much as possible.

Over a year ago, she successfully received two grants from New York City nonprofits to transform a deserted lot on school grounds that was “pretty much overrun with weeds,” she said, into a school garden and outdoor learning area.

Pictured is one of the outdoor learning areas at P.S. 185 which was previously a vacant and overgrown lot.


Cara Sclafani

Last year, she said, it was always a challenge to get teachers to wander outside of the classroom, “even though we set up this nice area for them with a tree canopy, benches and a reading library.”


And now? “The teachers are going to bring their students outside at least once a day,” Sclafani told MarketWatch. “Whether it’s just to read a book, paint or have physical education outside.”

She considers these types of activities “easy wins” to accomplish. Ultimately, however, she and other members of D3GSG are working on a “long-term vision” of having a “full-blown outdoor learning program” by the spring of 2021.

Sclafani said she was directly inspired by a Green Schoolyards America workshop she attended in June about constructing an outdoor learning environment. The organization, she said, has helped redesign P.S. 185’s outdoor learning space. She is on the infrastructure team at Green Schoolyards and is helping advise other schools across the county.

”Having outdoor learning at P.S.185 is a key factor for my family in determining whether or not my kids will attend in-person learning. We don’t have the school schedule yet, but I am hopeful my kids will be getting outside for at least a couple hours every day.”




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India’s Reliance Jio to roll out 100 million low-cost phones by December: Business Standard By Reuters


© Reuters. A woman rides her scooter past advertisements of Reliance Industries’ Jio telecoms unit, in Ahmedabad

BENGALURU (Reuters) – Reliance Industries Ltd’s (NS:) telecom unit is looking to outsource the manufacturing of over 100 million low-cost smartphones that will be built on Google’s Android platform, India’s Business Standard newspaper reported, citing sources.

The phones, which will be bundled with data packs, could be launched in December 2020 or early next year, the newspaper reported on Wednesday. (https://

Reliance, India’s most highly-valued company, in July said Alphabet Inc’s (O:) Google will invest $4.5 billion in its digital unit.

Billionaire Mukesh Ambani, who controls Reliance, in July said that Google would build an Android operating system (OS) to power a low-cost “4G or even 5G” smartphone that Reliance would design.

Reliance has sold nearly 33% of its digital arm, Jio Platforms, to raise 1.52 trillion rupees ($20.22 billion) and has won the backing of global financial and tech investors including, Facebook Inc (O:), Intel (O:) and Qualcomm (O:).

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Liquidation business booms in South Korea as wave of small retailers close due to virus By Reuters


© Reuters.

By Cynthia Kim and Hyun Young Yi

SEOUL (Reuters) – You Young-sik has tried his luck running businesses, but when his convenience store, a sausage factory and a second-hand furniture shop all failed, he realised he had found a niche, one that he understood well: helping people go out of business.

You says he is now busier than ever, due to the resurgence in coronavirus, tearing down sign boards and cash registers at shuttered hair salons, BBQ buffets and other places whose business model is based around human contact.

“This is my busiest year so far, having done this for 10 years. Inquiries are about four to five times higher,” said 54-year-old liquidation specialist, who added that his business started taking off about two years ago as a street-level economic downturn began.

“I can’t do them all but I still take about twice the work I used to, which is why I need to head out at 4 or 5 in the morning,” said You in the city of Suwon, south of Seoul, as he answers telephone calls and tightens ropes around tables and chairs on his truck.

Tough social distancing rules to curb a second wave of coronavirus have markedly slowed retail traffic and emptied cafes across Seoul since mid-August.

The tables and chairs that You collects from closing businesses will end up in recycled kitchenware shops, such as Dajoobang in a run-down part of Seoul’s Hwanghakdong.

“Our 600-pyeong (21,350 square feet) storage warehouse has been completely full for about two months,” said Cho Gye-su, a 53-year-old manager at Dajoobang.

“Second-hand goods have been piling up and we have nowhere to sell them to, so the coronavirus has been really bad for us,” said Cho, pointing to used fridges, rice cookers and waffle makers all cleaned up and displayed in glass racks.

FAMILY RETAILERS BATTERED

Inventory glut at recycled kitchenware stores and booming liquidation businesses point to battered family retailers in every corner of the country.

While policymakers brag that retail sales returned to growth in June and per-day exports recorded the slowest decline in 7 months in August, small businesses are failing at a rate not seen since the global financial crisis, data from the Korea Statistics shows.

The hardest hit sectors in Asia’s fourth largest economy include hospitality, retail and restaurants, which are traditionally small, family-run businesses.

South Korea has one of the world’s highest proportion of self-employed people, about 25% of the job market, making it very vulnerable to downturns. A 2017 Bank of Korea study showed only 38% of the self-employed businesses survive three years.

New retirees seeking to supplement pensions by opening fried chicken diners or coffee shops and unemployed youth starting their own cafes have driven demand for second-hand sales for liquidators like You.

But unprecedented social distancing restrictions imposed on eateries in Seoul since late August, banning onsite dining after 9 p.m. and limiting coffee and bakery franchises to takeout and delivery, has made trading tough for new start-ups.

The government has warned South Koreans for several years not to open more fried chicken shops or cafes as the small hospitality sector is saturated.

Small business profit margins were thinning before COVID-19.

On top of the coronavirus pandemic, that has also fuelled an acceleration of e-commerce, small businesses are fighting spiking rents, a shorter work week and higher minimum wages under the left-leaning President Moon Jae-in.

Moon has raised the legal minimum wage by about a third in the past three years to 8,720 won ($7.2) an hour for 2021 and capped weekly work hours to 52 hours, raising costs and making lay offs inevitable for small businesses.

Statistics Korea data show the number of self-employed businesses were down by 128,000 in July from a year earlier to 5.55 million, logging the biggest drop since the comparable period of 2009.

Kim Da-eun, 27, ran a private tuition school for the past three years in Anseong, south of Seoul, but is now shuttering it as the number of students has dropped below 10, down from 40 last year, as the coronavirus outbreak kept many at home.

“I’m now looking for a job but I don’t see anyone hiring. So I will be sticking to my delivery part-time for a while,” Kim said, observing the demolition of her business.

(This story fixes typo first in paragraph)





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NOW Revamps Business Model To Fit In The Long-Term Game (NYSE:DNOW)


DNOW Has Moderate Upside For Now

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NOW Inc.’s (DNOW) management is smart enough to understand that the energy product distribution business requires structural changes that go beyond short-term corrections necessary in the pandemic situation. So, it has been focusing on pushing e-commerce sales and other digital marketing initiatives to boost the top line. Plus, it will look to further lower the selling and warehousing costs, redesign the supply chain, and consolidate distribution centers to protect operating to the extent possible. The stock outperformed the VanEck Vectors Oil Services ETF (OIH) in the past year. I think it can continue to produce a low but steady return in the short to medium term.

Nonetheless, completion well shut-ins and the company’s closure of sites will not allow revenues to increase in the short term. The company has strong liquidity and zero debt, which can expand its relative valuation multiples in the medium term. I think long-term investors should hold on to the stock.

Strategic Re-focus And Cost Management

DNOW’s strategic focus, following the energy market downturn, has shifted from scaling up growth to one that values efficiency and minimizes costs. In the upstream end market, which continues to account for the majority of its revenues, there is room for further market share gains because the oilfield services market may consolidate. Given the peers’ leveraged balance sheet, NOW is at a relatively higher ground to survive and gain. Also, the company has been diversifying into midstream, downstream, industrial, and alternative energy markets, which are traditionally less volatile. It targets high-margin product lines, which can lead to profitable market share gains.

Earlier in the year, the company initiated an organizational restructuring by closing and consolidating facilities, removing management layers in North America, and renegotiating prices in terms of suppliers. The company looks to push its market-disruptive digital tools platform DigitalNOW. It is leveraging the DigitalNOW technology to funnel more product spend through the platform. It is redesigning its supply chain, finding the optimized hub-and-spoke architecture. To lower costs, it focuses on a centralized structure that will support smaller locations. Also, smaller locations involve less inventory risk. It has significantly lowered the selling and warehousing costs over the past few quarters. I discussed these in detail in my previous article.

As a result of the consistent effort to lower costs, the company’s EBITDA decremental was ~7% in Q2 even though the revenues declined by 39% in Q2 compared to Q1 following a much-depressed energy market. Typically, abrupt revenue declines drive much higher unfavorable decremental because of the effect of cost under-absorption. If the inventory charges are excluded, the company estimates that its EBITDA would have been close to the break-even level.

E-commerce As The New Platform

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DNOW’s e-commerce initiatives leverage the brand in the energy and industrial markets, especially after it introduced the DigitalNOW brand to create a unified commerce platform. In Q2, it completed implementation for a new E&P customer. More importantly, it is gaining traction in the midstream market as half of its new implementations in 2020 were in this segment. It has also recently registered two major integrated midstream customers. It has automated over 60 DNOW processes using artificial intelligence, which has pushed the digital initiative boundary. By 2020-end, it plans to complete a new order management system.

Near Term And Medium-Term Outlook

In Q3 2020, DNOW’s revenues will likely remain more subdued than in the recent past because of the persistent weakness in the U.S. In July, the U.S. rig count was 36% lower than the Q2 average, while the completed rig count in the unconventional shales was 80% lower year-over-year so far. Going by the trend, the company forecast its revenues to decrease by the low to mid-teen percentages in Q3. The company also expects warehousing selling and administrative expenses, which were $97 million in Q2, to decline to the high $80s million to low $90 million range.

In this backdrop, like most of the U.S. companies associated with the energy sector, DNOW aims to preserve liquidity while keeping its balance sheet strength in the near term. It plans to make significant cost reductions and change its strategies by combining businesses, centralizing support functions, consolidating distribution centers, and delayering management, as I discussed above in the article.

Analyzing Drivers In The U.S. And The Outlook

As the completions and drilled well counts continued to slip, the company’s revenues from the U.S. decreased by 41% in Q2 over Q1. Since the U.S. accounts for the majority of its top line (70% of the Q2 sales), a weak domestic end-market pulled the entire company down with it. The U.S. supply chain was severely fragile during Q2 after one of its top E&P customers reduced spend by ~80% sequentially. On top of that, a few plant turnaround projects that were scheduled for the year pushed out to 2021, leaving a hole in the company’s U.S. midstream business.

The U.S. Energy Center was nearly as non-productive during the quarter (40% down sequentially) after project deferrals and drilling & completion program suspension affected it adversely. However, the company is optimistic about a near-term revival in this category after it won several project wellhead hookups and tank battery contracts while renewing contracts with some of the upstream players. It the midstream space, it won business at six operating locations by bundling the materials and warehouse management services with the DigitalNOW platform. In U.S. Process Solutions, although revenues declined, there were a few green shoots in the aftermarket services in the downstream sector due to higher part orders and critical field service work.

Margin Level Analysis

In Q2, the company’s gross margin decreased by 100 basis points sequentially (i.e., compared to Q1) to 18.4%. In the U.S. operation, the losses deteriorated to $24 million due primarily to the decline in revenues. Operating earnings deteriorated further in Canada, while it remained steady in the international operations, as I will discuss next in the article.

Canadian and International Markets: Performance And Outlook

In Q2, the average rig count dropped by 87% in Canada, causing DNOW’s revenues from Canada to decrease by 47% compared to Q1. Many of the company’s energy customers canceled projects and delayed unconventional and oil sands activities. The company is making some efforts to reduce dependence on the traditional energy end market as it set up a vendor-managed inventory program with a renewable bio-fuels energy customer during the quarter.

Geographically, DNOW’s revenues were the most resilient in the international operations (19% down sequentially) in Q2. Gross margin, although weak (130 basis points down), held up relatively well due to better product mix. However, higher inventory charges following product line exit reduced the margin in Q2.

The Balance Sheet Is Strong

NOW has set a strategy of reducing working capital as a percentage of revenues. In 1H 2020, its cash flow from operations (or CFO) increased by 51% compared to a year ago. Despite a year-over-year decrease in revenues, the rise in CFO reflects a reduction in working capital requirement due to lower activity levels and the company’s customers conserving cash and delaying deliveries. Since capex is low, its free cash flow (or FCF) also increased handsomely in 1H 2020.

NOW is a zero-debt company, while its peers’ (FAST, MSM, and MRC) average debt-to-equity ratio was 0.39x as of June 30, 2020. Its liquidity was $525 million as of that date. A robust balance sheet and no debt is considered to be hugely beneficial when the economy reflects uncertainty. You can read more on the balance sheet in my previous article.

Linear Regression-Based Forecast

I have observed a regression equation based on the historical relationship among the crude oil price, the completed well count in the U.S. unconventional shales, and DNOW’s reported revenues for the past five years and the previous eight-quarter trend. Based on the model, revenues should decrease in the next twelve months (or NTM). While the top line can remain weak in 2022, I expect it to rebound in 2023.

In the Monte Carlo simulation, after 10,000 iterations, I find that the maximum frequency ranges between $2.6 billion and $3.6 billion. The trailing 12-month (or TTM) revenue falls short of this range. Investors, however, should note that this is only an academic exercise.

Based on a simple regression model using the average forecast revenues, I expect the company’s EBITDA to weaken and turn negative in the next two years. It can then recover sharply in 2023.

I have calculated the EV using DNOW’s past and forward EV/Revenue multiple (since I expect EBITDA to turn negative in NTM 2021, the EV/EBITDA multiple will be meaningless). Returns potential using the forward multiple (0.48x) is higher (41% upside) compared to returns potential using the past average multiple (19% upside). The sell-side analysts, however, expect even higher returns (42.6% downside) from the stock.

What’s The Take On DNOW?

Low upstream capex, hugely depleted completions well count, and rig count hitting a trough, coupled with the company’s closure of sites, will not allow NOW’s top line to take a breather in the short term. So, it looks beyond the traditional sales channel and pushes e-commerce sales and other digital marketing initiatives to boost the top line. With industry consolidation and churning of the high-margin product lines, the company can maintain or gain further market share in the medium to long term. With DigitalNOW as a unified commerce platform, it has registered two major integrated midstream customers in recent times.

The company will continue to lower the selling and warehousing costs to mitigate the margin pressure. Strategically, it has shed the scale-ramping model and adopted a model that focuses on efficiency enhancement, including supply chain redesigning and consolidating distribution centers. Over the medium term, such efforts will protect the margin and will boost it when sales growth returns. The company has strong liquidity and zero debt, which is a big plus in today’s environment. In my opinion, returns from the stock can stay muted in the short term but can increase significantly over the medium to long term.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.





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