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Public Act 101-0473


 

Public Act 0473 101ST GENERAL ASSEMBLY

  
  
  

 


 
Public Act 101-0473
 
HB2460 EnrolledLRB101 10083 RJF 55186 b

    AN ACT concerning finance.
 
    Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
 
    Section 1. Short title. This Act may be cited as the
Illinois Sustainable Investing Act.
 
    Section 5. Findings and purpose.
    (a) The General Assembly finds that consideration of
factors relevant to the environmental impact, social impact,
and governance of investments is vital for maximizing the
safety and performance of public funds. Such sustainability
factors are indicative of the overall performance of an
investment and are strong indicators of its long-term value.
Public agencies and governments have a duty to recognize and
evaluate these materially relevant factors.
    (b) It is the purpose of this Act to prudently integrate
sustainability factors into the investment decision-making,
investment analysis, portfolio construction, due diligence,
and investment ownership of public funds to maximize
anticipated financial returns, minimize projected risks, more
effectively execute fiduciary duties, and contribute to a more
just, accountable, and sustainable State of Illinois.
 
    Section 10. Definitions. As used in this Act:
 
    "Financial institution" means a bank, savings bank, or
credit union established under the laws of the State of
Illinois, another state, or the United States of America.
    "Governmental unit" has the same meaning as in the Local
Government Debt Reform Act.
    "Investment policy" means a written investment policy
adopted by a public agency or governmental unit which addresses
safety of principal, liquidity of funds, and return on
investment and which requires the investment portfolio be
structured in such a manner as to provide sufficient liquidity
to pay obligations as they come due.
    "Public agency" means the State of Illinois, the various
counties, townships, cities, towns, villages, school
districts, educational service regions, special road
districts, public water supply districts, fire protection
districts, drainage districts, levee districts, sewer
districts, housing authorities, the Illinois Bank Examiners'
Education Foundation, the Chicago Park District, and all other
political corporations or subdivisions of the State of
Illinois, now or hereafter created, whether herein
specifically mentioned or not.
    "Public funds" means current operating funds, special
funds, interest and sinking funds, and funds of any kind or
character belonging to or in the custody of any public agency.
    "Sustainability factors" means factors that may have a
material and relevant financial impact on the safety or
performance of an investment and which are complementary to
financial factors and financial accounting.
 
    Section 15. Development of sustainable investment
policies.
    (a) Any public agency or governmental unit should develop,
publish, and implement sustainable investment policies
applicable to the management of all public funds under its
control. The sustainable investment policy may be incorporated
in existing investment policies developed, published, and
implemented by a public agency or governmental unit.
    (b) The sustainable investment policy should include
material, relevant, and decision-useful sustainability factors
to be considered by the public agency or governmental unit as
one component of its overall evaluation of investment
decisions. Such factors may include, but are not be limited to:
(1) corporate governance and leadership factors; (2)
environmental factors; (3) social capital factors; (4) human
capital factors; and (5) business model and innovation factors.
 
    Section 20. Consideration of sustainable investment
factors in decision-making.
    (a) 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.
    (b) Sustainability factors may include, but are not limited
to, the following:
        (1) Corporate governance and leadership factors, such
    as the independence of boards and auditors, the expertise
    and competence of corporate boards and executives,
    systemic risk management practices, executive compensation
    structures, transparency and reporting, leadership
    diversity, regulatory and legal compliance, shareholder
    rights, and ethical conduct.
        (2) Environmental factors that may have an adverse or
    positive financial impact on investment performance, such
    as greenhouse gas emissions, air quality, energy
    management, water and wastewater management, waste and
    hazardous materials management, and ecological impacts.
        (3) Social capital factors that impact relationships
    with key outside parties, such as customers, local
    communities, the public, and the government, which may
    impact investment performance. Social capital factors
    include human rights, customer welfare, customer privacy,
    data security, access and affordability, selling practices
    and product labeling, community reinvestment, and
    community relations.
        (4) Human capital factors that recognize that the
    workforce is an important asset to delivering long-term
    value, including factors such as labor practices,
    responsible contractor and responsible bidder policies,
    employee health and safety, employee engagement, diversity
    and inclusion, and incentives and compensation.
        (5) Business model and innovation factors that reflect
    an ability to plan and forecast opportunities and risks,
    and whether a company can create long-term shareholder
    value, including factors such as supply chain management,
    materials sourcing and efficiency, business model
    resilience, product design and life cycle management, and
    physical impacts of climate change.
    (c) Sustainability factors may be analyzed in a variety of
ways, including, but not limited to: (1) direct financial
impacts and risks; (2) legal, regulatory, and policy impacts
and risks; (3) against industry norms, best practices, and
competitive drivers; and (4) stakeholder engagement.
    (d) Nothing in this Act prohibits a public agency or
governmental unit from integrating additional factors into its
investment decision-making, investment analysis, portfolio
construction, due diligence, and investment ownership of
public funds. This Act shall not apply to financial institution
time deposits or financial institution processing services.
 
    Section 100. The Deposit of State Moneys Act is amended by
changing Section 22.8 as follows:
 
    (15 ILCS 520/22.8)
    Sec. 22.8. The Treasurer shall develop, publish, and
implement an investment policy covering the management of all
State funds under his or her control. The investment policy
shall be published each year in the Treasurers' annual report
as prescribed in Section 15 of the State Treasurer Act (15 ILCS
505/15). The policy shall also be published at least once each
year in at least one newspaper of general circulation in both
Springfield and Chicago. Any such investment policy adopted by
the Treasurer shall be reviewed, and updated if necessary,
within 90 days following the installation of a new Treasurer.
    The investment policy shall include material, relevant,
and decision-useful sustainability factors to be considered by
the Treasurer in evaluating investment decisions, including,
but not limited to: (1) corporate governance and leadership
factors; (2) environmental factors; (3) social capital
factors; (4) human capital factors; and (5) business model and
innovation factors, as provided under the Illinois Sustainable
Investing.
(Source: P.A. 89-350, eff. 8-17-95.)
 
    Section 105. The Public Funds Investment Act is amended by
changing Section 2.5 as follows:
 
    (30 ILCS 235/2.5)
    Sec. 2.5. Investment policy.
    (a) Investment of public funds by a public agency shall be
governed by a written investment policy adopted by the public
agency. The level of detail and complexity of the investment
policy shall be appropriate to the nature of the funds, the
purpose for the funds, and the amount of the public funds
within the investment portfolio. The policy shall address
safety of principal, liquidity of funds, and return on
investment and shall require that the investment portfolio be
structured in such manner as to provide sufficient liquidity to
pay obligations as they come due. In addition, the investment
policy shall include or address the following:
        (1) a listing of authorized investments;
        (2) a rule, such as the "prudent person rule",
    establishing the standard of care that must be maintained
    by the persons investing the public funds;
        (3) investment guidelines that are appropriate to the
    nature of the funds, the purpose for the funds, and the
    amount of the public funds within the investment portfolio;
        (4) a policy regarding diversification of the
    investment portfolio that is appropriate to the nature of
    the funds, the purpose for the funds, and the amount of the
    public funds within the investment portfolio;
        (5) guidelines regarding collateral requirements, if
    any, for the deposit of public funds in a financial
    institution made pursuant to this Act, and, if applicable,
    guidelines for contractual arrangements for the custody
    and safekeeping of that collateral;
        (6) a policy regarding the establishment of a system of
    internal controls and written operational procedures
    designed to prevent losses of funds that might arise from
    fraud, employee error, misrepresentation by third parties,
    or imprudent actions by employees of the entity;
        (7) identification of the chief investment officer who
    is responsible for establishing the internal controls and
    written procedures for the operation of the investment
    program;
        (8) performance measures that are appropriate to the
    nature of the funds, the purpose for the funds, and the
    amount of the public funds within the investment portfolio;
        (9) a policy regarding appropriate periodic review of
    the investment portfolio, its effectiveness in meeting the
    public agency's needs for safety, liquidity, rate of
    return, and diversification, and its general performance;
        (10) a policy establishing at least quarterly written
    reports of investment activities by the public agency's
    chief financial officer for submission to the governing
    body and chief executive officer of the public agency. The
    reports shall include information regarding securities in
    the portfolio by class or type, book value, income earned,
    and market value as of the report date;
        (11) a policy regarding the selection of investment
    advisors, money managers, and financial institutions; and
        (12) a policy regarding ethics and conflicts of
    interest.
    (a-5) The investment policy shall include a statement that
material, relevant, and decision-useful sustainability factors
have been or are regularly considered by the agency, within the
bounds of financial and fiduciary prudence, in evaluating
investment decisions. Such factors include, but are not limited
to: (i) corporate governance and leadership factors; (ii)
environmental factors; (iii) social capital factors; (iv)
human capital factors; and (v) business model and innovation
factors, as provided under the Illinois Sustainable Investing
Act.
    (b) For purposes of the State or a county, the investment
policy shall be adopted by the elected treasurer and presented
to the chief executive officer and the governing body. For
purposes of any other public agency, the investment policy
shall be adopted by the governing body of the public agency.
    (c) The investment policy shall be made available to the
public at the main administrative office of the public agency.
    (d) The written investment policy required under this
Section shall be developed and implemented by January 1, 2000.
(Source: P.A. 90-688, eff. 7-31-98.)
 
    Section 110. The Illinois Pension Code is amended by
changing Section 1-113.6 and by adding Section 1-113.17 as
follows:
 
    (40 ILCS 5/1-113.6)
    Sec. 1-113.6. Investment policies. Every board of trustees
of a pension fund shall adopt a written investment policy and
file a copy of that policy with the Department of Insurance
within 30 days after its adoption. Whenever a board changes its
investment policy, it shall file a copy of the new policy with
the Department within 30 days.
    The investment policy shall include a statement that
material, relevant, and decision-useful sustainability factors
have been or are regularly considered by the board, within the
bounds of financial and fiduciary prudence, in evaluating
investment decisions. Such factors include, but are not limited
to: (1) corporate governance and leadership factors; (2)
environmental factors; (3) social capital factors; (4) human
capital factors; and (5) business model and innovation factors,
as provided under the Illinois Sustainable Investing Act.
(Source: P.A. 90-507, eff. 8-22-97.)
 
    (40 ILCS 5/1-113.17 new)
    Sec. 1-113.17. Investment sustainability. Every retirement
system, pension fund, or investment board subject to this Code
shall adopt a written investment policy and file a copy of that
policy with the Department of Insurance within 30 days after
its adoption. Whenever a board changes its investment policy,
it shall file a copy of the new policy with the Department
within 30 days.
    The investment policy shall include material, relevant,
and decision-useful sustainability factors to be considered by
the board, within the bounds of financial and fiduciary
prudence, in evaluating investment decisions. Such factors
shall include, but are not limited to: (1) corporate governance
and leadership factors; (2) environmental factors; (3) social
capital factors; (4) human capital factors; and (5) business
model and innovation factors, as provided under the Illinois
Sustainable Investing Act.

Effective Date: 1/1/2020