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The Brief: Jigar Shah’s $40 billion mandate, greening sovereign debt, social justice advisories, Chicago VCs, cold-chain carbon, India’s gig workers

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Greetings, Agents of Impact! 

Signals: Ahead of the Curve

Generate’s Jigar Shah tapped to rev up the Department of Energy’s loan office. The lending program, mostly moribund for the past four years, “is back in business,” declared Energy Secretary Jennifer Granholm. Shah pioneered no-money-down solar installations at SunEdison and went on to co-found Generate, an investor, owner and operator in microgrids, HVAC systems, biogas converters, charging depots, wastewater treatment and other categories of sustainable infrastructure (see, “Generate Capital raises $1 billion to scale sustainable infrastructure-as-a-service”). The department’s loan programs office has $40 billion in capital to speed the low-carbon transition. “He’s going to help us put together an indomitable portfolio of investments for American taxpayers, that will help us tackle climate change and create jobs,” Granholm said. “We’re ready to invest in advanced vehicles, carbon capture, advanced reactors and so much more.” The office, established by the 2009 stimulus bill, supported solar makers – including, famously, Solyndra – and helped Tesla build its first factory, but languished under the Trump administration. Shah will step down as Generate’s president. Scott Jacobs remains CEO; chief investment officer Matan Friedman will re-join the company’s board.

  • In his own words. “We definitely need 25 million new people to get to work to be able to decarbonize at the scale that we need to decarbonize. That’s a lot of jobs, and those are a lot of good-paying jobs,” Shah said on ImpactAlpha’s Agents of Impact podcast in January (see “Jigar Shah: What’s next for sustainable infrastructure? Deployment, deployment deployment”). “You have a lot of tailwind from political leadership saying, ‘It’s the right thing to do, and it’s the right time to do it.’”
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Greening sovereign debt to tackle converging crises. A majority of low-income countries need to restructure their loans in a brewing sovereign debt crisis stemming from the COVID pandemic. Looming mass extinctions and climate emergencies signal the accelerating stress on natural systems as well. Can solutions to one crisis address the others? A Nature and Climate Sovereign Bond Facility proposed by Finance for Biodiversity, aims to build on investor interest in green debt and create nature-performance bonds and other instruments that align payments with environmental outcomes. “This could be a key tool in creating a positive nature-capital outcome while avoiding default,” F4B’s Louis de Montpelier told ImpactAlpha. The $64 trillion sovereign debt market has been slow to integrate environmental, social and governance, or ESG, factors.

  • Inclusive, green debt relief. Angola, Argentina, Belize, Ecuador, Kenya, Lebanon, Suriname and Zambia are among the countries facing debt restructuring. Finance for Biodiversity calls for an international organization to set standards and seize “an historic opportunity for aligning sovereign debt relief with nature and climate outcomes” (see “Accelerating climate emergency spurs innovative financing for adaptation”).
  • More.

Abacus acquires Robasciotti & Philipson to meet client demand for social justice strategies. Abacus’ Brent Kessel and Rachel Robasciotti of Robasciotti & Philipson collaborated on Due Diligence 2.0 (see, and listen to, “The Reconstruction: How unlikely partners came together to fight racial bias in asset allocation). Now they are merging their California-based advisory firms. Santa Monica-based Abacus, with $3.8 billion in assets under management, will absorb San Francisco-based R&P, which advises more than 110 households representing $130 million in assets. “This partnership enables us to leverage our platform and resources to further advance our clients’ social justice-driven investment strategies,” says Kessel (see, “Brent Kessel: Expanding what’s possible with money”). Robasciotti and Maya Philipson will join Abacus but continue to separately run Adasina Social Capital, which they created to connect financial markets with movements for economic and racial justice. 

  • Social justice lens. Robasciotti last year launched the Adasina Social Justice All Cap Global ETF. Adasina developed the screening criteria by working with social justice activists to identify issues affecting their communities. “This approach gives us a data advantage relative to other solutions,” she said at the time.
  • M&A. The deal is another signal of the consolidation among financial advisory firms as they beef up impact investing capacities. Earlier this week, Pathstone acquired Cornerstone Capital Group.
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Sponsored by Conduit Capital and Conduit Connect

A new fund to launch the decade of purpose. Looking to meet the appetite of retail and professional investors for genuine and measurable impact investments, Conduit Capital and Ascension Ventures have launched The Conduit EIS Impact Fund to invest in high-impact businesses sourced by Conduit Connect

  • Global goals. The fund is focused on scaling companies aligned with the U.N. Sustainable Development Goals and will leverage the U.K.’s EIS tax relief. The key investment themes will be climate, education, health and wellbeing, financial inclusion and economic opportunity.
  • Impact screen. A pre-screening process, developed by Conduit Connect in collaboration with Deloitte, will ensure the scalable SDG-aligned impact of businesses supported by the fund. Businesses will have access to the broader support and network of Conduit Capital, an unparalleled source of impact solutions and innovation
  • Key information. The target first close is £3 million ($4.2 million) on April 5, with a total target fund size of £5 million, with a minimum ticket of £25,000 for eligible investors. The target return is 2.5x net of fees and excluding tax relief. 
  • Go deeper. To learn more about the fund, see the full article here.

Disclaimer: ImpactAlpha does not endorse or recommend any particular investment product or service.

Dealflow: Follow the Money

Chicago-based venture funds aim to bridge funding gaps for overlooked founders. Three-quarters of the record $130 billion in U.S. venture capital funding last year went to startups in California, New York and Massachusetts. Chicago Ventures, Lightbank and Cleveland Avenue are looking to even the playing field with new funds based in and focused on the Midwest. 

  • Seed stage. Chicago Ventures Fund III raised $63 million to lead seed investment rounds in overlooked founders whose ideas other investors dismiss as “unscalable, niche and unproven,” said Chicago Ventures’ Lindsay Knight
  • Climate tech. Lightbank II secured $180 million from institutional, family office and high-net-worth investors to make pre-seed, seed and Series A investments in climate and other tech startups.  
  • South and West. Cleveland Avenue raked in $70 million for its Cleveland Avenue State Treasurer Urban Success fund, or CAST US. The impact fund is targeting Black, Latinx and women-owned businesses specifically in Chicago’s South and West side neighborhoods. The Illinois Growth and Innovation Fund, a billion-dollar impact investing vehicle created by State Treasurer Michael Frerichs, committed $16 million. Benefit Chicago, a collaboration between the McArthur Foundation, Chicago Community Trust and Calvert Impact Capital, invested $10 million.
  • More.

Therma secures $10.2 million to cut carbon in the cold chain. Two of the most significant ways to cut greenhouse gases: reduce food waste and improve refrigeration. San Francisco-based Therma’s refrigeration-monitoring device could “significantly reduce emissions across the $1 trillion global cold-chain,” the company says. Its sensor is designed to minimize commercial food and industrial waste with alerts about equipment failure, power outages and human error. Funders include Active Impact Investments and Collaborative Fund

  • Corporate partners. Early users include fast food giants McDonald’s and Burger King, convenience store chain 7-Eleven and Wyndham Hotels.
  • Check it out.

Dealflow overflow. Other investment news crossing our desks:

  • Bangalore-based Apna secures $12.5 million for its recruitment and social platform supporting India’s gig workers. 
  • Living Cities invests $2 million in Advance, Mission Driven Finance’s San Diego-focused fund for small businesses, social enterprises and nonprofits.
  • Singapore’s Her Capital backs Hong Kong-based media startup Neufast as the first of its women-focused investments.
  • Dandelion Energy clinches $30 million for home-based geothermal energy systems.
  • Vector Innovation Fund is looking to back advanced health technologies that will curb future pandemic impacts.

Agents of Impact: Follow the Talent

Michael Herskovich is named global head of stewardship at BNP Paribas Asset Management… Prime Coalition is hiring a director of impact in Cambridge and a partnerships associate in San Francisco… UN Women is hiring a strategic partnership specialist in New York… Google is accepting grant applications from Black tech startup founders in Europe… Tideline’s Ben Thornley hosts “Climate Investing with True Impact” with Nuveen’s Allison Spector, Prime Impact Fund’s Amy Duffuor, Brookfield Asset Management’s Natalie Adomait and Rede Partners’ Jeremy Smith, Tuesday, March 9. 

Thank you for your impact.

– Mar. 4, 2021



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Workers

Amazon.com, Inc. (NASDAQ:AMZN), (DASH) – COVID Relief Bill Could Trigger Larger Tax Bills For Gig Workers

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Gig workers and third-party sellers on e-commerce platforms such as Etsy, Inc. (NASDAQ: ETSY), Walmart Marketplace (NYSE: WMT) and even Amazon (NASDAQ: AMZN) could find themselves with tax issues in 2022 thanks to a change in Internal Revenue Service tax codes contained within the American Rescue Plan Act of 2021.

The $1.9 trillion COVID relief bill that just passed the U.S. House and Senate and is expected to be signed into law by President Joe Biden by this weekend amends Section 6050W of the IRS code to require reporting for any transactions that exceed $600 in gross sales through a 1099-K form.

This change means not only are workers required to claim this income on their taxes (as currently required), but any business that pays them, such as Uber (NYSE: UBER), Lyft (NASDAQ: LYFT), DoorDash (NYSE: DASH) and even marketplaces like Etsy (NASDAQ: ETSY), will be required to submit a 1099-K to the IRS on the individual’s behalf. Under current law, payment organizations must only file a 1099-K form on behalf of a seller when total sales exceed $20,000 and/or total transactions exceed 200 in a tax year.

“Payments made in settlement of third-party network transactions, however, are required to be reported only if the amount to be reported exceeds $20,000 and the aggregate number of transactions exceeds 200 with respect to any payee within a calendar year,” Internal Revenue Bulletin: 2011-23, issued in 2011, says.

“There is a segment of the population that is probably making ends meet and of course they should be aware of their tax obligations, but as they try to cobble together an income, should we be going after these people?” asked Katie Vlietstra, vice president of government relations and public affairs for the National Association for the Self-Employed (NASE).

Vlietstra told Modern Shipper NASE believes all sellers and gig economy workers should be meeting their tax obligations, but the new requirement, which goes into effect on Jan. 1, 2022, could have unintended consequences.

“Every individual should be meeting their tax obligation. They should understand their tax liabilities,” she said. “Our concern is … when you are making big fundamental changes, there isn’t a lot of emphasis placed on the technical changes.”

Vlietstra noted the DoorDash driver who makes money on the weekend to supplement a full-time job.

“Is that their true income [on the 1099-K]? Is that expenses? Do they understand what that means?” she said. “My position on this is maybe $600 is the right amount – we have seen some states that have moved to that reporting level – but there hasn’t been a [conversation with] people who are working in the diversified economy.”

Read: Getting gig workers the unemployment they deserve

NASE will be focusing on education this year to ensure everyone complies with the new regulation, and Vlietstra said it will continue to “voice to Congress that we need to circle back on this.”

“I think there are some unintended grabs that could happen,” she added. “Everyone should be meeting their tax obligations, but if I’m selling my table for $800 more than I paid for it, [do I need to claim that]? Overall, the bill was good. We need to get back to work. We need small businesses to get back to work … but in a massive $2 trillion bill, things get thrown in.”

For businesses, the change is straightforward – they need to monitor and report any income they pay out exceeding $600. That includes online marketplaces that are facilitating these transactions. But for third-party sellers on platforms like Etsy, it gets more complicated, requiring more tracking of expenses as income that may have slipped under the IRS’ radar before may no longer.

“You need to be tracking your expenses and what is a qualified business expense,” Vlietstra said. “Make sure you understand what this really means for your tax exposure. Make sure you are tracking gas and meals and other things. As taxes get more complicated, they may need help doing their taxes.”

There are several open questions, though, Vlietstra said. An example would be an individual who sells tickets on a platform such as StubHub. Is that a business? Does that single transaction, if it exceeds the $600 limit, trigger a 1099-K? What about roommates who may pay each via Venmo for utilities? At the end of the year, those transactions could exceed $600, but should that money be claimed as income? How would the roommates record that on a tax return if Venmo issued a 1099-K? And how does a platform such as Venmo know what should be considered income? The answers to these questions, Vlietstra said, are to be determined, but she is concerned that situations such as this could trigger unnecessary IRS audits.

“I feel like we put our finger in a hole and there are still 500 holes spitting water at us,” she said.

Click for more Modern Shipper articles by Brian Straight.

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Ruling in arbitration case bad news for gig workers – Massachusetts Lawyers Weekly

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A recent decision from the 1st U.S. Circuit Court of Appeals found that a housecleaner who claimed her employer had misclassified her as an independent contractor couldn’t sue because she was bound by a “clickwrap” mandatory arbitration agreement.

The plaintiff in Emmanuel v. Handy Technologies, Inc. had submitted an application through the website of a company that assigns housecleaning jobs to workers and clicked a checkbox agreeing to its terms of use.

She subsequently used the company’s mobile app to accept an independent contractor agreement, which was required for her to be connected with customers.

The 15-section agreement included a mandatory arbitration clause in section 12. That portion was not visible unless the user scrolled down through the entire agreement.

The plaintiff performed between 10 to 20 cleaning jobs for the defendant but stopped working because of payment issues. She then brought a putative class action alleging that she and others had been misclassified as independent contractors in violation of the state Wage Act and the federal Fair Labor Standards Act.

When the defendant moved to compel arbitration, the plaintiff argued that she did not have sufficient notice of the arbitration clause to be bound by it.

But the 1st Circuit disagreed. Applying the standard set forth earlier this year by the Supreme Judicial Court in Kauders v. Uber Technologies, Inc., it concluded that an online contract had been formed because the plaintiff had “reasonable notice” of the terms and made a “reasonable manifestation of assent” to those terms.

The court acknowledged that only a portion of the agreement was immediately visible on the plaintiff’s phone screen, and that portion did not include the arbitration provision. But it took the position that it was sufficiently clear that “additional text further specifying the terms of the Agreement could be viewed by scrolling.”

In doing so, it specifically declined to read Kauders as holding that for a user to be bound by terms visible only through scrolling, he or she must be required to scroll through the full text of the agreement.

The problem with that reading is that it fails to take into account that workers like the plaintiff are largely unsophisticated, low-wage gig workers. They are encountering long, dense agreements like the one in Emmanuel on their phones, which makes thorough review next to impossible. Moreover, they are not in a position to negotiate over the terms of such an agreement.

In fact, in some ways, these workers are more similar to consumers facing “take it or leave it” arbitration provisions than traditional employees.

It’s unfortunate that decisions like this one gloss over that reality.

 

Massachusetts Lawyers Weekly’s Editorial Advisory Board provides knowledge and guidance for the editorials that appear on this page. The board is an advisory panel only, with no official voting or participation record. The input from the board is a tremendous resource to Lawyers Weekly; however, the editorials represent the position of the newspaper and its editorial staff, not the members, nor any given member, of the board. 

BOARD OF EDITORS: Robert J. Cordy, Boston; Sophia L. Hall, Boston; Martin W. Healy, Boston; Hon. Margaret R. Hinkle, Boston; Thomas M. Hoopes, Boston; Regina M. Hurley, Boston; Shiva Karimi, Boston; Hon. Rudolph Kass, Boston; Marsha V. Kazarosian, Haverhill; Andrea C. Kramer, Boston; Renee M. Landers, Boston; Richard L. Levine, Boston; Elizabeth N. Mulvey, Boston; Eric J. Parker, Boston; C. Max Perlman, Boston; Patricia M. Rapinchuk, Springfield; Martin R. Rosenthal, Boston; Jeffrey Sacks, Boston; Carol A. Starkey, Boston

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6 Ways Gig Workers Can Invest for Retirement | Business

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In 2021, you can contribute up to $13,500 if you’re under 50, or $16,500 if you’re 50 or older.

There’s no Roth option, so you’ll be taxed upon withdrawal. There’s also a steep penalty if you need to withdraw your SIMPLE IRA funds within two years of setting up the account: 25%, instead of the usual amount, on top of taxes.

As the employer, you’ll have to contribute to your SIMPLE IRA on your own behalf, as well as for any employee who’s earned at least $5,000 in at least two of the past five years and expects to earn at least that much for the current year. You’ll have to choose one of the following formulas:

  • Automatically contribute 2%.
  • Match 3% of contributions dollar for dollar.

Due to the lower limits and the extra layer of rules, a Solo 401(k) or SEP IRA is typically a better option for solo gig workers. However, if you expand and add others to the payroll, a SIMPLE IRA may be a good option.

6. Taxable Brokerage Account

If you’ve exhausted your other retirement savings options or you want the flexibility to invest with fewer rules, a plain old taxable brokerage account works. Since you won’t get any tax breaks for investing in a brokerage account, though, aim to max out your Roth IRA or traditional IRA contribution before you go this route.

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