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

 

 

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1material and relevant financial impact on the safety or
2performance of an investment and which are complementary to
3financial factors and financial accounting.
 
4    Section 15. Development of sustainable investment
5policies.
6    (a) Any public agency or governmental unit should develop,
7publish, and implement sustainable investment policies
8applicable to the management of all public funds under its
9control. The sustainable investment policy may be incorporated
10in existing investment policies developed, published, and
11implemented by a public agency or governmental unit.
12    (b) The sustainable investment policy should include
13material, relevant, and decision-useful sustainability factors
14to be considered by the public agency or governmental unit as
15one component of its overall evaluation of investment
16decisions. Such factors may include, but are not be limited to:
17(1) corporate governance and leadership factors; (2)
18environmental factors; (3) social capital factors; (4) human
19capital factors; and (5) business model and innovation factors.
 
20    Section 20. Consideration of sustainable investment
21factors in decision-making.
22    (a) A public agency shall prudently integrate
23sustainability factors into its investment decision-making,
24investment analysis, portfolio construction, due diligence,

 

 

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1and investment ownership in order to maximize anticipated
2financial returns, minimize projected risk, and more
3effectively execute its fiduciary duty.
4    (b) Sustainability factors may include, but are not limited
5to, the following:
6        (1) Corporate governance and leadership factors, such
7    as the independence of boards and auditors, the expertise
8    and competence of corporate boards and executives,
9    systemic risk management practices, executive compensation
10    structures, transparency and reporting, leadership
11    diversity, regulatory and legal compliance, shareholder
12    rights, and ethical conduct.
13        (2) Environmental factors that may have an adverse or
14    positive financial impact on investment performance, such
15    as greenhouse gas emissions, air quality, energy
16    management, water and wastewater management, waste and
17    hazardous materials management, and ecological impacts.
18        (3) Social capital factors that impact relationships
19    with key outside parties, such as customers, local
20    communities, the public, and the government, which may
21    impact investment performance. Social capital factors
22    include human rights, customer welfare, customer privacy,
23    data security, access and affordability, selling practices
24    and product labeling, community reinvestment, and
25    community relations.
26        (4) Human capital factors that recognize that the

 

 

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1    workforce is an important asset to delivering long-term
2    value, including factors such as labor practices,
3    responsible contractor and responsible bidder policies,
4    employee health and safety, employee engagement, diversity
5    and inclusion, and incentives and compensation.
6        (5) Business model and innovation factors that reflect
7    an ability to plan and forecast opportunities and risks,
8    and whether a company can create long-term shareholder
9    value, including factors such as supply chain management,
10    materials sourcing and efficiency, business model
11    resilience, product design and life cycle management, and
12    physical impacts of climate change.
13    (c) Sustainability factors may be analyzed in a variety of
14ways, including, but not limited to: (1) direct financial
15impacts and risks; (2) legal, regulatory, and policy impacts
16and risks; (3) against industry norms, best practices, and
17competitive drivers; and (4) stakeholder engagement.
18    (d) Nothing in this Act prohibits a public agency or
19governmental unit from integrating additional factors into its
20investment decision-making, investment analysis, portfolio
21construction, due diligence, and investment ownership of
22public funds. This Act shall not apply to financial institution
23time deposits or financial institution processing services.
 
24    Section 100. The Deposit of State Moneys Act is amended by
25changing Section 22.8 as follows:
 

 

 

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1    (15 ILCS 520/22.8)
2    Sec. 22.8. The Treasurer shall develop, publish, and
3implement an investment policy covering the management of all
4State funds under his or her control. The investment policy
5shall be published each year in the Treasurers' annual report
6as prescribed in Section 15 of the State Treasurer Act (15 ILCS
7505/15). The policy shall also be published at least once each
8year in at least one newspaper of general circulation in both
9Springfield and Chicago. Any such investment policy adopted by
10the Treasurer shall be reviewed, and updated if necessary,
11within 90 days following the installation of a new Treasurer.
12    The investment policy shall include material, relevant,
13and decision-useful sustainability factors to be considered by
14the Treasurer in evaluating investment decisions, including,
15but not limited to: (1) corporate governance and leadership
16factors; (2) environmental factors; (3) social capital
17factors; (4) human capital factors; and (5) business model and
18innovation factors, as provided under the Illinois Sustainable
19Investing.
20(Source: P.A. 89-350, eff. 8-17-95.)
 
21    Section 105. The Public Funds Investment Act is amended by
22changing Section 2.5 as follows:
 
23    (30 ILCS 235/2.5)

 

 

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1    Sec. 2.5. Investment policy.
2    (a) Investment of public funds by a public agency shall be
3governed by a written investment policy adopted by the public
4agency. The level of detail and complexity of the investment
5policy shall be appropriate to the nature of the funds, the
6purpose for the funds, and the amount of the public funds
7within the investment portfolio. The policy shall address
8safety of principal, liquidity of funds, and return on
9investment and shall require that the investment portfolio be
10structured in such manner as to provide sufficient liquidity to
11pay obligations as they come due. In addition, the investment
12policy shall include or address the following:
13        (1) a listing of authorized investments;
14        (2) a rule, such as the "prudent person rule",
15    establishing the standard of care that must be maintained
16    by the persons investing the public funds;
17        (3) investment guidelines that are appropriate to the
18    nature of the funds, the purpose for the funds, and the
19    amount of the public funds within the investment portfolio;
20        (4) a policy regarding diversification of the
21    investment portfolio that is appropriate to the nature of
22    the funds, the purpose for the funds, and the amount of the
23    public funds within the investment portfolio;
24        (5) guidelines regarding collateral requirements, if
25    any, for the deposit of public funds in a financial
26    institution made pursuant to this Act, and, if applicable,

 

 

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1    guidelines for contractual arrangements for the custody
2    and safekeeping of that collateral;
3        (6) a policy regarding the establishment of a system of
4    internal controls and written operational procedures
5    designed to prevent losses of funds that might arise from
6    fraud, employee error, misrepresentation by third parties,
7    or imprudent actions by employees of the entity;
8        (7) identification of the chief investment officer who
9    is responsible for establishing the internal controls and
10    written procedures for the operation of the investment
11    program;
12        (8) performance measures that are appropriate to the
13    nature of the funds, the purpose for the funds, and the
14    amount of the public funds within the investment portfolio;
15        (9) a policy regarding appropriate periodic review of
16    the investment portfolio, its effectiveness in meeting the
17    public agency's needs for safety, liquidity, rate of
18    return, and diversification, and its general performance;
19        (10) a policy establishing at least quarterly written
20    reports of investment activities by the public agency's
21    chief financial officer for submission to the governing
22    body and chief executive officer of the public agency. The
23    reports shall include information regarding securities in
24    the portfolio by class or type, book value, income earned,
25    and market value as of the report date;
26        (11) a policy regarding the selection of investment

 

 

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1    advisors, money managers, and financial institutions; and
2        (12) a policy regarding ethics and conflicts of
3    interest.
4    (a-5) The investment policy shall include a statement that
5material, relevant, and decision-useful sustainability factors
6have been or are regularly considered by the agency, within the
7bounds of financial and fiduciary prudence, in evaluating
8investment decisions. Such factors include, but are not limited
9to: (i) corporate governance and leadership factors; (ii)
10environmental factors; (iii) social capital factors; (iv)
11human capital factors; and (v) business model and innovation
12factors, as provided under the Illinois Sustainable Investing
13Act.
14    (b) For purposes of the State or a county, the investment
15policy shall be adopted by the elected treasurer and presented
16to the chief executive officer and the governing body. For
17purposes of any other public agency, the investment policy
18shall be adopted by the governing body of the public agency.
19    (c) The investment policy shall be made available to the
20public at the main administrative office of the public agency.
21    (d) The written investment policy required under this
22Section shall be developed and implemented by January 1, 2000.
23(Source: P.A. 90-688, eff. 7-31-98.)
 
24    Section 110. The Illinois Pension Code is amended by
25changing Section 1-113.6 and by adding Section 1-113.17 as

 

 

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1follows:
 
2    (40 ILCS 5/1-113.6)
3    Sec. 1-113.6. Investment policies. Every board of trustees
4of a pension fund shall adopt a written investment policy and
5file a copy of that policy with the Department of Insurance
6within 30 days after its adoption. Whenever a board changes its
7investment policy, it shall file a copy of the new policy with
8the Department within 30 days.
9    The investment policy shall include a statement that
10material, relevant, and decision-useful sustainability factors
11have been or are regularly considered by the board, within the
12bounds of financial and fiduciary prudence, in evaluating
13investment decisions. Such factors include, but are not limited
14to: (1) corporate governance and leadership factors; (2)
15environmental factors; (3) social capital factors; (4) human
16capital factors; and (5) business model and innovation factors,
17as provided under the Illinois Sustainable Investing Act.
18(Source: P.A. 90-507, eff. 8-22-97.)
 
19    (40 ILCS 5/1-113.17 new)
20    Sec. 1-113.17. Investment sustainability. Every retirement
21system, pension fund, or investment board subject to this Code
22shall adopt a written investment policy and file a copy of that
23policy with the Department of Insurance within 30 days after
24its adoption. Whenever a board changes its investment policy,

 

 

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1it shall file a copy of the new policy with the Department
2within 30 days.
3    The investment policy shall include material, relevant,
4and decision-useful sustainability factors to be considered by
5the board, within the bounds of financial and fiduciary
6prudence, in evaluating investment decisions. Such factors
7shall include, but are not limited to: (1) corporate governance
8and leadership factors; (2) environmental factors; (3) social
9capital factors; (4) human capital factors; and (5) business
10model and innovation factors, as provided under the Illinois
11Sustainable Investing Act.