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1 | AN ACT concerning finance.
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2 | Be it enacted by the People of the State of Illinois,
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3 | represented in the General Assembly:
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4 | Section 1. Short title. This Act may be cited as the | ||||||||||||||||||||||||||||||||
5 | Illinois Sustainable Investing Act. | ||||||||||||||||||||||||||||||||
6 | Section 5. Findings and purpose.
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7 | (a) The General Assembly finds that consideration of | ||||||||||||||||||||||||||||||||
8 | factors relevant to the environmental impact, social impact, | ||||||||||||||||||||||||||||||||
9 | and governance of investments is vital for maximizing the | ||||||||||||||||||||||||||||||||
10 | safety and performance of public funds. Such sustainability | ||||||||||||||||||||||||||||||||
11 | factors are indicative of the overall performance of an | ||||||||||||||||||||||||||||||||
12 | investment and are strong indicators of its long-term value. | ||||||||||||||||||||||||||||||||
13 | Public agencies and governments have a duty to recognize and | ||||||||||||||||||||||||||||||||
14 | evaluate these materially relevant factors.
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15 | (b) It is the purpose of this Act to prudently integrate | ||||||||||||||||||||||||||||||||
16 | sustainability factors into the investment decision-making, | ||||||||||||||||||||||||||||||||
17 | investment analysis, portfolio construction, due diligence, | ||||||||||||||||||||||||||||||||
18 | and investment ownership of public funds to maximize | ||||||||||||||||||||||||||||||||
19 | anticipated financial returns, minimize projected risks, more | ||||||||||||||||||||||||||||||||
20 | effectively execute fiduciary duties, and contribute to a more | ||||||||||||||||||||||||||||||||
21 | just, accountable, and sustainable State of Illinois.
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22 | Section 10. Definitions. As used in this Act:
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1 | "Governmental unit" has the same meaning as in the Local | ||||||
2 | Government Debt Reform Act.
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3 | "Investment policy" means a written investment policy | ||||||
4 | adopted by a public agency or governmental unit which addresses | ||||||
5 | safety of principal, liquidity of funds, and return on | ||||||
6 | investment and which requires the investment portfolio be | ||||||
7 | structured in such a manner as to provide sufficient liquidity | ||||||
8 | to pay obligations as they come due.
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9 | "Public agency" means the State of Illinois, the various | ||||||
10 | counties, townships, cities, towns, villages, school | ||||||
11 | districts, educational service regions, special road | ||||||
12 | districts, public water supply districts, fire protection | ||||||
13 | districts, drainage districts, levee districts, sewer | ||||||
14 | districts, housing authorities, the Illinois Bank Examiners' | ||||||
15 | Education Foundation, the Chicago Park District, and all other | ||||||
16 | political corporations or subdivisions of the State of | ||||||
17 | Illinois, now or hereafter created, whether herein | ||||||
18 | specifically mentioned or not.
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19 | "Public funds" means current operating funds, special | ||||||
20 | funds, interest and sinking funds, and funds of any kind or | ||||||
21 | character belonging to or in the custody of any public agency.
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22 | "Sustainability factors" means factors that may have a | ||||||
23 | material and relevant financial impact on the safety or | ||||||
24 | performance of an investment and which are complementary to | ||||||
25 | financial factors and financial accounting.
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1 | Section 15. Development of sustainable investment | ||||||
2 | policies.
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3 | (a) Any public agency or governmental unit shall develop, | ||||||
4 | publish, and implement sustainable investment policies | ||||||
5 | applicable to the management of all public funds under its | ||||||
6 | control. The sustainable investment policy may be incorporated | ||||||
7 | in existing investment policies developed, published, and | ||||||
8 | implemented by a public agency or governmental unit.
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9 | (b) The sustainable investment policy shall include | ||||||
10 | material, relevant, and decision-useful sustainability factors | ||||||
11 | to be applied by the public agency or governmental unit in | ||||||
12 | evaluating investment decisions, including, but not limited | ||||||
13 | to: (1) corporate governance and leadership factors; (2) | ||||||
14 | environmental factors; (3) social capital factors; (4) human | ||||||
15 | capital factors; and (5) business model and innovation factors.
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16 | Section 20. Consideration of sustainable investment | ||||||
17 | factors in decision-making.
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18 | (a) A public agency shall prudently integrate | ||||||
19 | sustainability factors into its investment decision-making, | ||||||
20 | investment analysis, portfolio construction, due diligence, | ||||||
21 | and investment ownership in order to maximize anticipated | ||||||
22 | financial returns, minimize projected risk, and more | ||||||
23 | effectively execute its fiduciary duty.
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24 | (b) Sustainability factors include, but are not limited to, | ||||||
25 | the 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.
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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.
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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.
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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.
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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.
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7 | (c) Sustainability factors may be analyzed in a variety of | ||||||
8 | ways, including, but not limited to: (1) direct financial | ||||||
9 | impacts and risks; (2) legal, regulatory, and policy impacts | ||||||
10 | and risks; (3) against industry norms, best practices, and | ||||||
11 | competitive drivers; and (4) stakeholder engagement.
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12 | Section 100. The Deposit of State Moneys Act is amended by | ||||||
13 | changing Section 22.8 as follows:
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14 | (15 ILCS 520/22.8)
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15 | Sec. 22.8.
The Treasurer shall develop, publish, and | ||||||
16 | implement an
investment policy covering the management of all | ||||||
17 | State funds under his or her
control. The investment policy | ||||||
18 | shall be published each year in the Treasurers'
annual report | ||||||
19 | as prescribed in Section 15 of the State Treasurer Act (15 ILCS
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20 | 505/15). The policy shall also be published at least once each | ||||||
21 | year in at
least one newspaper of general circulation in both | ||||||
22 | Springfield and Chicago.
Any such investment policy adopted by | ||||||
23 | the Treasurer shall be reviewed, and
updated if necessary, | ||||||
24 | within 90 days following the installation of a new
Treasurer.
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1 | The investment policy shall include material, relevant, | ||||||
2 | and decision-useful sustainability factors to be applied by the | ||||||
3 | Treasurer in evaluating investment decisions, including, but | ||||||
4 | not limited to: (1) corporate governance and leadership | ||||||
5 | factors; (2) environmental factors; (3) social capital | ||||||
6 | factors; (4) human capital factors; and (5) business model and | ||||||
7 | innovation factors, as provided under the Illinois Sustainable | ||||||
8 | Investing. | ||||||
9 | (Source: P.A. 89-350, eff. 8-17-95.)
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10 | Section 105. The Public Funds Investment Act is amended by | ||||||
11 | changing Section 2.5 as follows:
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12 | (30 ILCS 235/2.5)
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13 | Sec. 2.5. Investment policy.
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14 | (a) Investment of public funds by a public
agency shall be
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15 | governed by a written investment policy adopted by the
public
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16 | agency. The level of detail and complexity of the investment | ||||||
17 | policy shall be
appropriate to the
nature of the funds, the | ||||||
18 | purpose for the funds, and the amount of the public
funds | ||||||
19 | within the
investment portfolio. The policy shall address | ||||||
20 | safety of principal, liquidity
of funds, and return
on | ||||||
21 | investment and shall require that the investment portfolio be | ||||||
22 | structured in
such manner as to
provide sufficient liquidity to | ||||||
23 | pay obligations as they come due. In addition,
the investment
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24 | policy shall include or address the following:
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1 | (1) a listing of authorized investments;
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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;
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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;
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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;
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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;
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17 | (6) a policy regarding the establishment of a system of | ||||||
18 | internal controls
and written operational
procedures
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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;
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22 | (7) identification of the chief investment officer who
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23 | is responsible for establishing the internal controls and
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24 | written procedures for
the operation of the investment | ||||||
25 | program;
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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;
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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;
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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;
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14 | (11) a policy regarding the selection of investment | ||||||
15 | advisors, money
managers, and financial institutions; and
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16 | (12) a policy regarding ethics and conflicts of | ||||||
17 | interest ; and .
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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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1 | policy shall be
adopted by the elected treasurer and presented | ||||||
2 | to the chief executive officer
and the governing body. For | ||||||
3 | purposes of any other public agency, the
investment policy | ||||||
4 | shall be adopted by the governing body of the public agency.
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5 | (c) The investment policy shall be made available to the | ||||||
6 | public at the main
administrative office of the public agency.
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7 | (d) The written investment policy required under this | ||||||
8 | Section shall be
developed and implemented by
January 1, 2000.
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9 | (Source: P.A. 90-688, eff. 7-31-98.)
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10 | Section 110. The Illinois Pension Code is amended by | ||||||
11 | changing Section 1-113.6 and by adding Section 1-113.17 as | ||||||
12 | follows:
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13 | (40 ILCS 5/1-113.6)
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14 | Sec. 1-113.6. Investment policies. Every board of trustees | ||||||
15 | of a pension
fund shall adopt a written investment policy and | ||||||
16 | file a copy of that policy
with the Department of Insurance | ||||||
17 | within 30 days after its adoption. Whenever a
board changes its | ||||||
18 | investment policy, it shall file a copy of the new policy
with | ||||||
19 | the Department within 30 days.
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20 | The investment policy shall include material, relevant, | ||||||
21 | and decision-useful sustainability factors to be applied by the | ||||||
22 | board in evaluating investment decisions, including, but not | ||||||
23 | limited to: (1) corporate governance and leadership factors; | ||||||
24 | (2) environmental factors; (3) social capital factors; (4) |
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1 | human capital factors; and (5) business model and innovation | ||||||
2 | factors, as provided under the Illinois Sustainable Investing | ||||||
3 | Act. | ||||||
4 | (Source: P.A. 90-507, eff. 8-22-97.)
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5 | (40 ILCS 5/1-113.17 new) | ||||||
6 | Sec. 1-113.17. Investment sustainability. Every retirement | ||||||
7 | system, pension fund, or investment board subject to this Code | ||||||
8 | shall adopt a written investment policy and file a copy of that | ||||||
9 | policy with the Department of Insurance within 30 days after | ||||||
10 | its adoption. Whenever a board changes its investment policy, | ||||||
11 | it shall file a copy of the new policy with the Department | ||||||
12 | within 30 days. | ||||||
13 | The investment policy shall include material, relevant, | ||||||
14 | and decision-useful sustainability factors to be applied by the | ||||||
15 | board in evaluating investment decisions, including, but not | ||||||
16 | limited to: (1) corporate governance and leadership factors; | ||||||
17 | (2) environmental factors; (3) social capital factors; (4) | ||||||
18 | human capital factors; and (5) business model and innovation | ||||||
19 | factors, as provided under the Illinois Sustainable Investing | ||||||
20 | Act.
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