Bill Text: IL SB2062 | 2019-2020 | 101st General Assembly | Introduced


Bill Title: Creates the Illinois Sustainable Investing Act. Provides that any public agency or governmental unit shall develop, publish, and implement sustainable investment policies applicable to the management of all public funds under its control. Provides that the sustainable investment policy may be incorporated in existing investment policies developed, published, and implemented by a public agency or governmental unit. Provides that the sustainable investment policy shall include material, relevant, and decision-useful sustainability factors to be applied by the public agency or governmental unit in evaluating investment decisions. Provides that a public agency shall prudently integrate sustainability factors into its investment decision-making, investment analysis, portfolio construction, due diligence, and investment ownership in order to maximize anticipated financial returns, minimize projected risk, and more effectively execute its fiduciary duty. Specifies sustainability factors, and the ways in which such factors may be analyzed. Amends the Deposit of State Moneys Act, the Public Funds Investment Act, and the Illinois Pension Code to make changes concerning investment policy and the Illinois Sustainable Investing Act. Provides findings and purpose provisions. Defines terms.

Spectrum: Partisan Bill (Democrat 2-0)

Status: (Introduced) 2019-07-03 - Senate Floor Amendment No. 2 Pursuant to Senate Rule 3-9(b) / Referred to Assignments [SB2062 Detail]

Download: Illinois-2019-SB2062-Introduced.html


101ST GENERAL ASSEMBLY
State of Illinois
2019 and 2020
SB2062

Introduced 2/15/2019, by Sen. Iris Y. Martinez

SYNOPSIS AS INTRODUCED:
New Act
15 ILCS 520/22.8
30 ILCS 235/2.5
40 ILCS 5/1-113.6
40 ILCS 5/1-113.17 new

Creates the Illinois Sustainable Investing Act. Provides that any public agency or governmental unit shall develop, publish, and implement sustainable investment policies applicable to the management of all public funds under its control. Provides that the sustainable investment policy may be incorporated in existing investment policies developed, published, and implemented by a public agency or governmental unit. Provides that the sustainable investment policy shall include material, relevant, and decision-useful sustainability factors to be applied by the public agency or governmental unit in evaluating investment decisions. Provides that a public agency shall prudently integrate sustainability factors into its investment decision-making, investment analysis, portfolio construction, due diligence, and investment ownership in order to maximize anticipated financial returns, minimize projected risk, and more effectively execute its fiduciary duty. Specifies sustainability factors, and the ways in which such factors may be analyzed. Amends the Deposit of State Moneys Act, the Public Funds Investment Act, and the Illinois Pension Code to make changes concerning investment policy and the Illinois Sustainable Investing Act. Provides findings and purpose provisions. Defines terms.
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FISCAL NOTE ACT MAY APPLY

A BILL FOR

SB2062LRB101 10084 RJF 55187 b
1 AN ACT concerning finance.
2 Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
4 Section 1. Short title. This Act may be cited as the
5Illinois Sustainable Investing Act.
6 Section 5. Findings and purpose.
7 (a) The General Assembly finds that consideration of
8factors relevant to the environmental impact, social impact,
9and governance of investments is vital for maximizing the
10safety and performance of public funds. Such sustainability
11factors are indicative of the overall performance of an
12investment and are strong indicators of its long-term value.
13Public agencies and governments have a duty to recognize and
14evaluate these materially relevant factors.
15 (b) It is the purpose of this Act to prudently integrate
16sustainability factors into the investment decision-making,
17investment analysis, portfolio construction, due diligence,
18and investment ownership of public funds to maximize
19anticipated financial returns, minimize projected risks, more
20effectively execute fiduciary duties, and contribute to a more
21just, accountable, and sustainable State of Illinois.
22 Section 10. Definitions. As used in this Act:

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1 "Governmental unit" has the same meaning as in the Local
2Government Debt Reform Act.
3 "Investment policy" means a written investment policy
4adopted by a public agency or governmental unit which addresses
5safety of principal, liquidity of funds, and return on
6investment and which requires the investment portfolio be
7structured in such a manner as to provide sufficient liquidity
8to pay obligations as they come due.
9 "Public agency" means the State of Illinois, the various
10counties, townships, cities, towns, villages, school
11districts, educational service regions, special road
12districts, public water supply districts, fire protection
13districts, drainage districts, levee districts, sewer
14districts, housing authorities, the Illinois Bank Examiners'
15Education Foundation, the Chicago Park District, and all other
16political corporations or subdivisions of the State of
17Illinois, now or hereafter created, whether herein
18specifically mentioned or not.
19 "Public funds" means current operating funds, special
20funds, interest and sinking funds, and funds of any kind or
21character belonging to or in the custody of any public agency.
22 "Sustainability factors" means factors that may have a
23material and relevant financial impact on the safety or
24performance of an investment and which are complementary to
25financial factors and financial accounting.

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1 Section 15. Development of sustainable investment
2policies.
3 (a) Any public agency or governmental unit shall develop,
4publish, and implement sustainable investment policies
5applicable to the management of all public funds under its
6control. The sustainable investment policy may be incorporated
7in existing investment policies developed, published, and
8implemented by a public agency or governmental unit.
9 (b) The sustainable investment policy shall include
10material, relevant, and decision-useful sustainability factors
11to be applied by the public agency or governmental unit in
12evaluating investment decisions, including, but not limited
13to: (1) corporate governance and leadership factors; (2)
14environmental factors; (3) social capital factors; (4) human
15capital factors; and (5) business model and innovation factors.
16 Section 20. Consideration of sustainable investment
17factors in decision-making.
18 (a) A public agency shall prudently integrate
19sustainability factors into its investment decision-making,
20investment analysis, portfolio construction, due diligence,
21and investment ownership in order to maximize anticipated
22financial returns, minimize projected risk, and more
23effectively execute its fiduciary duty.
24 (b) Sustainability factors include, but are not limited to,
25the following:

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1 (1) Corporate governance and leadership factors, such
2 as the independence of boards and auditors, the expertise
3 and competence of corporate boards and executives,
4 systemic risk management practices, executive compensation
5 structures, transparency and reporting, leadership
6 diversity, regulatory and legal compliance, shareholder
7 rights, and ethical conduct.
8 (2) Environmental factors that may have an adverse or
9 positive financial impact on investment performance, such
10 as greenhouse gas emissions, air quality, energy
11 management, water and wastewater management, waste and
12 hazardous materials management, and ecological impacts.
13 (3) Social capital factors that impact relationships
14 with key outside parties, such as customers, local
15 communities, the public, and the government, which may
16 impact investment performance. Social capital factors
17 include human rights, customer welfare, customer privacy,
18 data security, access and affordability, selling practices
19 and product labeling, community reinvestment, and
20 community relations.
21 (4) Human capital factors that recognize that the
22 workforce is an important asset to delivering long-term
23 value, including factors such as labor practices, employee
24 health and safety, employee engagement, diversity and
25 inclusion, and incentives and compensation.
26 (5) Business model and innovation factors that reflect

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1 an ability to plan and forecast opportunities and risks,
2 and whether a company can create long-term shareholder
3 value, including factors such as supply chain management,
4 materials sourcing and efficiency, business model
5 resilience, product design and life cycle management, and
6 physical impacts of climate change.
7 (c) Sustainability factors may be analyzed in a variety of
8ways, including, but not limited to: (1) direct financial
9impacts and risks; (2) legal, regulatory, and policy impacts
10and risks; (3) against industry norms, best practices, and
11competitive drivers; and (4) stakeholder engagement.
12 Section 100. The Deposit of State Moneys Act is amended by
13changing Section 22.8 as follows:
14 (15 ILCS 520/22.8)
15 Sec. 22.8. The Treasurer shall develop, publish, and
16implement an investment policy covering the management of all
17State funds under his or her control. The investment policy
18shall be published each year in the Treasurers' annual report
19as prescribed in Section 15 of the State Treasurer Act (15 ILCS
20505/15). The policy shall also be published at least once each
21year in at least one newspaper of general circulation in both
22Springfield and Chicago. Any such investment policy adopted by
23the Treasurer shall be reviewed, and updated if necessary,
24within 90 days following the installation of a new Treasurer.

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1 The investment policy shall include material, relevant,
2and decision-useful sustainability factors to be applied by the
3Treasurer in evaluating investment decisions, including, but
4not limited to: (1) corporate governance and leadership
5factors; (2) environmental factors; (3) social capital
6factors; (4) human capital factors; and (5) business model and
7innovation factors, as provided under the Illinois Sustainable
8Investing.
9(Source: P.A. 89-350, eff. 8-17-95.)
10 Section 105. The Public Funds Investment Act is amended by
11changing Section 2.5 as follows:
12 (30 ILCS 235/2.5)
13 Sec. 2.5. Investment policy.
14 (a) Investment of public funds by a public agency shall be
15governed by a written investment policy adopted by the public
16agency. The level of detail and complexity of the investment
17policy shall be appropriate to the nature of the funds, the
18purpose for the funds, and the amount of the public funds
19within the investment portfolio. The policy shall address
20safety of principal, liquidity of funds, and return on
21investment and shall require that the investment portfolio be
22structured in such manner as to provide sufficient liquidity to
23pay obligations as they come due. In addition, the investment
24policy shall include or address the following:

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1 (1) a listing of authorized investments;
2 (2) a rule, such as the "prudent person rule",
3 establishing the standard of care that must be maintained
4 by the persons investing the public funds;
5 (3) investment guidelines that are appropriate to the
6 nature of the funds, the purpose for the funds, and the
7 amount of the public funds within the investment portfolio;
8 (4) a policy regarding diversification of the
9 investment portfolio that is appropriate to the nature of
10 the funds, the purpose for the funds, and the amount of the
11 public funds within the investment portfolio;
12 (5) guidelines regarding collateral requirements, if
13 any, for the deposit of public funds in a financial
14 institution made pursuant to this Act, and, if applicable,
15 guidelines for contractual arrangements for the custody
16 and safekeeping of that collateral;
17 (6) a policy regarding the establishment of a system of
18 internal controls and written operational procedures
19 designed to prevent losses of funds that might arise from
20 fraud, employee error, misrepresentation by third parties,
21 or imprudent actions by employees of the entity;
22 (7) identification of the chief investment officer who
23 is responsible for establishing the internal controls and
24 written procedures for the operation of the investment
25 program;
26 (8) performance measures that are appropriate to the

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1 nature of the funds, the purpose for the funds, and the
2 amount of the public funds within the investment portfolio;
3 (9) a policy regarding appropriate periodic review of
4 the investment portfolio, its effectiveness in meeting the
5 public agency's needs for safety, liquidity, rate of
6 return, and diversification, and its general performance;
7 (10) a policy establishing at least quarterly written
8 reports of investment activities by the public agency's
9 chief financial officer for submission to the governing
10 body and chief executive officer of the public agency. The
11 reports shall include information regarding securities in
12 the portfolio by class or type, book value, income earned,
13 and market value as of the report date;
14 (11) a policy regarding the selection of investment
15 advisors, money managers, and financial institutions; and
16 (12) a policy regarding ethics and conflicts of
17 interest; and .
18 (13) a policy regarding material, relevant, and
19 decision-useful sustainability factors applied by the
20 agency in evaluating investment decisions, including, but
21 not limited to: (i) corporate governance and leadership
22 factors; (ii) environmental factors; (iii) social capital
23 factors; (iv) human capital factors; and (v) business model
24 and innovation factors, as provided under the Illinois
25 Sustainable Investing Act.
26 (b) For purposes of the State or a county, the investment

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1policy shall be adopted by the elected treasurer and presented
2to the chief executive officer and the governing body. For
3purposes of any other public agency, the investment policy
4shall be adopted by the governing body of the public agency.
5 (c) The investment policy shall be made available to the
6public at the main administrative office of the public agency.
7 (d) The written investment policy required under this
8Section shall be developed and implemented by January 1, 2000.
9(Source: P.A. 90-688, eff. 7-31-98.)
10 Section 110. The Illinois Pension Code is amended by
11changing Section 1-113.6 and by adding Section 1-113.17 as
12follows:
13 (40 ILCS 5/1-113.6)
14 Sec. 1-113.6. Investment policies. Every board of trustees
15of a pension fund shall adopt a written investment policy and
16file a copy of that policy with the Department of Insurance
17within 30 days after its adoption. Whenever a board changes its
18investment policy, it shall file a copy of the new policy with
19the Department within 30 days.
20 The investment policy shall include material, relevant,
21and decision-useful sustainability factors to be applied by the
22board in evaluating investment decisions, including, but not
23limited to: (1) corporate governance and leadership factors;
24(2) environmental factors; (3) social capital factors; (4)

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1human capital factors; and (5) business model and innovation
2factors, as provided under the Illinois Sustainable Investing
3Act.
4(Source: P.A. 90-507, eff. 8-22-97.)
5 (40 ILCS 5/1-113.17 new)
6 Sec. 1-113.17. Investment sustainability. Every retirement
7system, pension fund, or investment board subject to this Code
8shall adopt a written investment policy and file a copy of that
9policy with the Department of Insurance within 30 days after
10its adoption. Whenever a board changes its investment policy,
11it shall file a copy of the new policy with the Department
12within 30 days.
13 The investment policy shall include material, relevant,
14and decision-useful sustainability factors to be applied by the
15board in evaluating investment decisions, including, but not
16limited to: (1) corporate governance and leadership factors;
17(2) environmental factors; (3) social capital factors; (4)
18human capital factors; and (5) business model and innovation
19factors, as provided under the Illinois Sustainable Investing
20Act.
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