Illinois General Assembly - Full Text of HB0232
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Full Text of HB0232  102nd General Assembly

HB0232ham001 102ND GENERAL ASSEMBLY

Rep. Elizabeth Hernandez

Filed: 4/15/2021

 

 


 

 


 
10200HB0232ham001LRB102 05177 RPS 25177 a

1
AMENDMENT TO HOUSE BILL 232

2    AMENDMENT NO. ______. Amend House Bill 232 by replacing
3everything after the enacting clause with the following:
 
4    "Section 5. The Illinois Pension Code is amended by
5changing Section 1-110.16 and by adding Section 1-110.17 as
6follows:
 
7    (40 ILCS 5/1-110.16)
8    Sec. 1-110.16. Transactions prohibited by retirement
9systems; companies that boycott Israel, for-profit companies
10that contract to shelter migrant children, Iran-restricted
11companies, Sudan-restricted companies, and expatriated
12entities.
13    (a) As used in this Section:
14        "Boycott Israel" means engaging in actions that are
15    politically motivated and are intended to penalize,
16    inflict economic harm on, or otherwise limit commercial

 

 

10200HB0232ham001- 2 -LRB102 05177 RPS 25177 a

1    relations with the State of Israel or companies based in
2    the State of Israel or in territories controlled by the
3    State of Israel.
4        "Company" means any sole proprietorship, organization,
5    association, corporation, partnership, joint venture,
6    limited partnership, limited liability partnership,
7    limited liability company, or other entity or business
8    association, including all wholly owned subsidiaries,
9    majority-owned subsidiaries, parent companies, or
10    affiliates of those entities or business associations,
11    that exist for the purpose of making profit.
12        "Contract to shelter migrant children" means entering
13    into a contract with the federal government to shelter
14    migrant children under the federal Unaccompanied Alien
15    Children Program or a substantially similar federal
16    program.
17        "Illinois Investment Policy Board" means the board
18    established under subsection (b) of this Section.
19        "Direct holdings" in a company means all publicly
20    traded securities of that company that are held directly
21    by the retirement system in an actively managed account or
22    fund in which the retirement system owns all shares or
23    interests.
24        "Expatriated entity" has the meaning ascribed to it in
25    Section 1-15.120 of the Illinois Procurement Code.
26        "Indirect holdings" in a company means all securities

 

 

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1    of that company that are held in an account or fund, such
2    as a mutual fund, managed by one or more persons not
3    employed by the retirement system, in which the retirement
4    system owns shares or interests together with other
5    investors not subject to the provisions of this Section or
6    that are held in an index fund.
7        "Iran-restricted company" means a company that meets
8    the qualifications under Section 1-110.15 of this Code.
9        "Private market fund" means any private equity fund,
10    private equity funds of funds, venture capital fund, hedge
11    fund, hedge fund of funds, real estate fund, or other
12    investment vehicle that is not publicly traded.
13        "Restricted companies" means companies that boycott
14    Israel, for-profit companies that contract to shelter
15    migrant children, Iran-restricted companies,
16    Sudan-restricted companies, and expatriated entities.
17        "Retirement system" means a retirement system
18    established under Article 2, 14, 15, 16, or 18 of this Code
19    or the Illinois State Board of Investment.
20        "Sudan-restricted company" means a company that meets
21    the qualifications under Section 1-110.6 of this Code.
22    (b) There shall be established an Illinois Investment
23Policy Board. The Illinois Investment Policy Board shall
24consist of 7 members. Each board of a pension fund or
25investment board created under Article 15, 16, or 22A of this
26Code shall appoint one member, and the Governor shall appoint

 

 

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14 members.
2    (c) Notwithstanding any provision of law to the contrary,
3beginning January 1, 2016, Sections 110.15 and 1-110.6 of this
4Code shall be administered in accordance with this Section.
5    (d) By April 1, 2016, the Illinois Investment Policy Board
6shall make its best efforts to identify all Iran-restricted
7companies, Sudan-restricted companies, and companies that
8boycott Israel and assemble those identified companies into a
9list of restricted companies, to be distributed to each
10retirement system.
11    These efforts shall include the following, as appropriate
12in the Illinois Investment Policy Board's judgment:
13        (1) reviewing and relying on publicly available
14    information regarding Iran-restricted companies,
15    Sudan-restricted companies, and companies that boycott
16    Israel, including information provided by nonprofit
17    organizations, research firms, and government entities;
18        (2) contacting asset managers contracted by the
19    retirement systems that invest in Iran-restricted
20    companies, Sudan-restricted companies, and companies that
21    boycott Israel;
22        (3) contacting other institutional investors that have
23    divested from or engaged with Iran-restricted companies,
24    Sudan-restricted companies, and companies that boycott
25    Israel; and
26        (4) retaining an independent research firm to identify

 

 

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1    Iran-restricted companies, Sudan-restricted companies,
2    and companies that boycott Israel.
3    The Illinois Investment Policy Board shall review the list
4of restricted companies on a quarterly basis based on evolving
5information from, among other sources, those listed in this
6subsection (d) and distribute any updates to the list of
7restricted companies to the retirement systems and the State
8Treasurer.
9    By April 1, 2018, the Illinois Investment Policy Board
10shall make its best efforts to identify all expatriated
11entities and include those companies in the list of restricted
12companies distributed to each retirement system and the State
13Treasurer. These efforts shall include the following, as
14appropriate in the Illinois Investment Policy Board's
15judgment:
16        (1) reviewing and relying on publicly available
17    information regarding expatriated entities, including
18    information provided by nonprofit organizations, research
19    firms, and government entities;
20        (2) contacting asset managers contracted by the
21    retirement systems that invest in expatriated entities;
22        (3) contacting other institutional investors that have
23    divested from or engaged with expatriated entities; and
24        (4) retaining an independent research firm to identify
25    expatriated entities.
26    By July 1, 2022, the Illinois Investment Policy Board

 

 

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1shall make its best efforts to identify all for-profit
2companies that contract to shelter migrant children and
3include those companies in the list of restricted companies
4distributed to each retirement system. These efforts shall
5include the following, as appropriate in the Illinois
6Investment Policy Board's judgment:
7        (1) reviewing and relying on publicly available
8    information regarding for-profit companies that contract
9    to shelter migrant children, including information
10    provided by nonprofit organizations, research firms, and
11    government entities;
12        (2) contacting asset managers contracted by the
13    retirement systems that invest in for-profit companies
14    that contract to shelter migrant children;
15        (3) contacting other institutional investors that have
16    divested from or engaged with for-profit companies that
17    contract to shelter migrant children; and
18        (4) retaining an independent research firm to identify
19    for-profit companies that contract to shelter migrant
20    children.
21    (e) The Illinois Investment Policy Board shall adhere to
22the following procedures for companies on the list of
23restricted companies:
24        (1) For each company newly identified in subsection
25    (d), the Illinois Investment Policy Board shall send a
26    written notice informing the company of its status and

 

 

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1    that it may become subject to divestment or shareholder
2    activism by the retirement systems.
3        (2) If, following the Illinois Investment Policy
4    Board's engagement pursuant to this subsection (e) with a
5    restricted company, that company ceases activity that
6    designates the company to be an Iran-restricted company, a
7    Sudan-restricted company, a company that boycotts Israel,
8    or an expatriated entity, or a for-profit company that
9    contracts to shelter migrant children, the company shall
10    be removed from the list of restricted companies and the
11    provisions of this Section shall cease to apply to it
12    unless it resumes such activities.
13    (f) Except as provided in subsection (f-1) of this Section
14the retirement system shall adhere to the following procedures
15for companies on the list of restricted companies:
16        (1) The retirement system shall identify those
17    companies on the list of restricted companies in which the
18    retirement system owns direct holdings and indirect
19    holdings.
20        (2) The retirement system shall instruct its
21    investment advisors to sell, redeem, divest, or withdraw
22    all direct holdings of restricted companies from the
23    retirement system's assets under management in an orderly
24    and fiduciarily responsible manner within 12 months after
25    the company's most recent appearance on the list of
26    restricted companies.

 

 

10200HB0232ham001- 8 -LRB102 05177 RPS 25177 a

1        (3) The retirement system may not acquire securities
2    of restricted companies.
3        (4) The provisions of this subsection (f) do not apply
4    to the retirement system's indirect holdings or private
5    market funds. The Illinois Investment Policy Board shall
6    submit letters to the managers of those investment funds
7    containing restricted companies requesting that they
8    consider removing the companies from the fund or create a
9    similar actively managed fund having indirect holdings
10    devoid of the companies. If the manager creates a similar
11    fund, the retirement system shall replace all applicable
12    investments with investments in the similar fund in an
13    expedited timeframe consistent with prudent investing
14    standards.
15    (f-1) The retirement system shall adhere to the following
16procedures for restricted companies that are expatriated
17entities or for-profit companies that contract to shelter
18migrant children:
19        (1) To the extent that the retirement system believes
20    that shareholder activism would be more impactful than
21    divestment, the retirement system shall have the authority
22    to engage with a restricted company prior to divesting.
23        (2) Subject to any applicable State or Federal laws,
24    methods of shareholder activism utilized by the retirement
25    system may include, but are not limited to, bringing
26    shareholder resolutions and proxy voting on shareholder

 

 

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1    resolutions.
2        (3) The retirement system shall report on its
3    shareholder activism and the outcome of such efforts to
4    the Illinois Investment Policy Board by April 1 of each
5    year.
6        (4) If the engagement efforts of the retirement system
7    are unsuccessful, then it shall adhere to the procedures
8    under subsection (f) of this Section.
9    (g) Upon request, and by April 1 of each year, each
10retirement system shall provide the Illinois Investment Policy
11Board with information regarding investments sold, redeemed,
12divested, or withdrawn in compliance with this Section.
13    (h) Notwithstanding any provision of this Section to the
14contrary, a retirement system may cease divesting from
15companies pursuant to subsection (f) if clear and convincing
16evidence shows that the value of investments in such companies
17becomes equal to or less than 0.5% of the market value of all
18assets under management by the retirement system. For any
19cessation of divestment authorized by this subsection (h), the
20retirement system shall provide a written notice to the
21Illinois Investment Policy Board in advance of the cessation
22of divestment, setting forth the reasons and justification,
23supported by clear and convincing evidence, for its decision
24to cease divestment under subsection (f).
25    (i) The cost associated with the activities of the
26Illinois Investment Policy Board shall be borne by the boards

 

 

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1of each pension fund or investment board created under Article
215, 16, or 22A of this Code.
3    (j) With respect to actions taken in compliance with this
4Section, including all good-faith determinations regarding
5companies as required by this Section, the retirement system
6and Illinois Investment Policy Board are exempt from any
7conflicting statutory or common law obligations, including any
8fiduciary duties under this Article and any obligations with
9respect to choice of asset managers, investment funds, or
10investments for the retirement system's securities portfolios.
11    (k) It is not the intent of the General Assembly in
12enacting this amendatory Act of the 99th General Assembly to
13cause divestiture from any company based in the United States
14of America. The Illinois Investment Policy Board shall
15consider this intent when developing or reviewing the list of
16restricted companies.
17    (l) If any provision of this amendatory Act of the 99th
18General Assembly or its application to any person or
19circumstance is held invalid, the invalidity of that provision
20or application does not affect other provisions or
21applications of this amendatory Act of the 99th General
22Assembly that can be given effect without the invalid
23provision or application.
24    (m) If any provision of Public Act 100-551 this amendatory
25Act of the 100th General Assembly or its application to any
26person or circumstance is held invalid, the invalidity of that

 

 

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1provision or application does not affect other provisions or
2applications of Public Act 100-551 this amendatory Act of the
3100th General Assembly that can be given effect without the
4invalid provision or application.
5    If any provision of this amendatory Act of the 102nd
6General Assembly or its application to any person or
7circumstance is held invalid, the invalidity of that provision
8or application does not affect other provisions or
9applications of this amendatory Act of the 102nd General
10Assembly that can be given effect without the invalid
11provision or application.
12(Source: P.A. 99-128, eff. 7-23-15; 100-551, eff. 1-1-18.)
 
13    (40 ILCS 5/1-110.17 new)
14    Sec. 1-110.17. Expiration of prohibited transactions. If,
15at least 4 years after the effective date of an amendatory Act
16that initially establishes a prohibited transaction under this
17Article, the Illinois Investment Policy Board concludes that
18divestment is no longer necessary due to achievement of the
19underlying goals of the amendatory Act establishing the
20prohibited transaction, changes in status surrounding the
21prohibited transactions, or other verifiable reasons, the
22Illinois Investment Policy Board may cease actions to require
23divestment, identify restricted companies, or prohibit
24transactions by a majority vote of the Illinois Investment
25Policy Board if: (1) no less than one year prior to the change

 

 

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1in policy, the Illinois Investment Policy Board notifies, in
2writing, the General Assembly of the change in policy and
3lists the reasons for changing the policy; and (2) the General
4Assembly does not, before the change in policy, adopt a House
5Resolution or a Senate Resolution instructing the Illinois
6Investment Policy Board to not change the policy.
 
7    Section 99. Effective date. This Act takes effect upon
8becoming law.".