103RD GENERAL ASSEMBLY
State of Illinois
2023 and 2024
SB2429

 

Introduced 2/10/2023, by Sen. Ram Villivalam

 

SYNOPSIS AS INTRODUCED:
 
30 ILCS 238/10
30 ILCS 238/20

    Amends the Illinois Sustainable Investing Act. Provides that, effective January 1, 2024, every investment manager shall comply with annual disclosure requirements that will require the investment manager to provide a description of the process through which the manager will 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, identify and minimize projected risk, and execute its fiduciary duties more effectively. Provides that the investment manager shall provide the annual disclosure to each public agency, pension fund, retirement system, or governmental unit for whom the investment manager is acting as a fiduciary or seeking selection as a fiduciary prior to acting in this capacity and at least annually thereafter. Provides that annual disclosures shall be submitted by January 31st of every year after the effective date of the amendatory Act. Defines "investment manager".


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A BILL FOR

 

SB2429LRB103 30646 DTM 57104 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 5. The Illinois Sustainable Investing Act is
5amended by changing Sections 10 and 20 as follows:
 
6    (30 ILCS 238/10)
7    Sec. 10. Definitions. As used in this Act:
8    "Financial institution" means a bank, savings bank, or
9credit union established under the laws of the State of
10Illinois, another state, or the United States of America.
11    "Governmental unit" has the same meaning as in the Local
12Government Debt Reform Act.
13    "Investment manager" means:
14        (1) a fiduciary selected by a public agency, pension
15    fund, retirement system or governmental unit who has the
16    power to manage, acquire, or dispose of any asset of a
17    public agency, pension fund, retirement system or
18    governmental unit;
19        (2) has acknowledged in writing that he or she is a
20    fiduciary with respect to the public fund, retirement
21    system or pension fund; and
22        (3) is at least one of the following: (i) registered
23    as an investment adviser under the federal Investment

 

 

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1    Advisers Act of 1940; (ii) registered as an investment
2    adviser under the Illinois Securities Law of 1953; (iii) a
3    bank, as defined in the Investment Advisers Act of 1940;
4    or (iv) an insurance company authorized to transact
5    business in this State.
6    "Investment policy" means a written investment policy
7adopted by a public agency or governmental unit which
8addresses safety of principal, liquidity of funds, and return
9on investment 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
26material and relevant financial impact on the safety or

 

 

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1performance of an investment and which are complementary to
2financial factors and financial accounting.
3(Source: P.A. 101-473, eff. 1-1-20.)
 
4    (30 ILCS 238/20)
5    Sec. 20. Consideration of sustainable investment factors
6in decision-making.
7    (a) A public agency shall prudently integrate
8sustainability factors into its investment decision-making,
9investment analysis, portfolio construction, due diligence,
10and investment ownership in order to maximize anticipated
11financial returns, minimize projected risk, and more
12effectively execute its fiduciary duty.
13    (b) Sustainability factors may include, but are not
14limited to, the following:
15        (1) Corporate governance and leadership factors, such
16    as the independence of boards and auditors, the expertise
17    and competence of corporate boards and executives,
18    systemic risk management practices, executive compensation
19    structures, transparency and reporting, leadership
20    diversity, regulatory and legal compliance, shareholder
21    rights, and ethical conduct.
22        (2) Environmental factors that may have an adverse or
23    positive financial impact on investment performance, such
24    as greenhouse gas emissions, air quality, energy
25    management, water and wastewater management, waste and

 

 

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1    hazardous materials management, and ecological impacts.
2        (3) Social capital factors that impact relationships
3    with key outside parties, such as customers, local
4    communities, the public, and the government, which may
5    impact investment performance. Social capital factors
6    include human rights, customer welfare, customer privacy,
7    data security, access and affordability, selling practices
8    and product labeling, community reinvestment, and
9    community relations.
10        (4) Human capital factors that recognize that the
11    workforce is an important asset to delivering long-term
12    value, including factors such as labor practices,
13    responsible contractor and responsible bidder policies,
14    employee health and safety, employee engagement, diversity
15    and inclusion, and incentives and compensation.
16        (5) Business model and innovation factors that reflect
17    an ability to plan and forecast opportunities and risks,
18    and whether a company can create long-term shareholder
19    value, including factors such as supply chain management,
20    materials sourcing and efficiency, business model
21    resilience, product design and life cycle management, and
22    physical impacts of climate change.
23    (c) Sustainability factors may be analyzed in a variety of
24ways, including, but not limited to: (1) direct financial
25impacts and risks; (2) legal, regulatory, and policy impacts
26and risks; (3) against industry norms, best practices, and

 

 

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1competitive drivers; and (4) stakeholder engagement.
2    (d) Nothing in this Act prohibits a public agency or
3governmental unit from integrating additional factors into its
4investment decision-making, investment analysis, portfolio
5construction, due diligence, and investment ownership of
6public funds. This Act shall not apply to financial
7institution time deposits or financial institution processing
8services.
9    (d) Effective January 1, 2024, every investment manager
10shall comply with annual disclosure requirements, which shall
11include, but shall not be limited to, a description of the
12process through which the manager prudently integrates the
13sustainability factors described in subsection (b) into their
14investment decision-making, investment analysis, portfolio
15construction, due diligence, and investment ownership in order
16to maximize anticipated financial returns, identify and
17minimize projected risk, and execute the manager's fiduciary
18duties more effectively. The investment manager shall provide
19the manager's annual disclosure to each public agency, pension
20fund, retirement system, or governmental unit for whom the
21investment manager is acting as a fiduciary or seeking
22selection as a fiduciary before acting in this official
23capacity and at least annually thereafter. Annual disclosures
24shall be submitted by January 31st of every year after the
25effective date of this amendatory Act of the 103rd General
26Assembly.

 

 

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1(Source: P.A. 101-473, eff. 1-1-20.)