Full Text of HB2460 101st General Assembly
HB2460enr 101ST GENERAL ASSEMBLY |
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| 1 | | AN ACT concerning finance.
| 2 | | Be it enacted by the People of the State of Illinois,
| 3 | | represented in the General Assembly:
| 4 | | Section 1. Short title. This Act may be cited as the | 5 | | Illinois Sustainable Investing Act. | 6 | | Section 5. Findings and purpose.
| 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.
| 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.
| 22 | | Section 10. Definitions. As used in this Act:
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| 1 | | "Financial institution" means a bank, savings bank, or | 2 | | credit union established under the laws of the State of | 3 | | Illinois, another state, or the United States of America. | 4 | | "Governmental unit" has the same meaning as in the Local | 5 | | Government Debt Reform Act.
| 6 | | "Investment policy" means a written investment policy | 7 | | adopted by a public agency or governmental unit which addresses | 8 | | safety of principal, liquidity of funds, and return on | 9 | | investment and which requires the investment portfolio be | 10 | | structured in such a manner as to provide sufficient liquidity | 11 | | to pay obligations as they come due.
| 12 | | "Public agency" means the State of Illinois, the various | 13 | | counties, townships, cities, towns, villages, school | 14 | | districts, educational service regions, special road | 15 | | districts, public water supply districts, fire protection | 16 | | districts, drainage districts, levee districts, sewer | 17 | | districts, housing authorities, the Illinois Bank Examiners' | 18 | | Education Foundation, the Chicago Park District, and all other | 19 | | political corporations or subdivisions of the State of | 20 | | Illinois, now or hereafter created, whether herein | 21 | | specifically mentioned or not.
| 22 | | "Public funds" means current operating funds, special | 23 | | funds, interest and sinking funds, and funds of any kind or | 24 | | character belonging to or in the custody of any public agency.
| 25 | | "Sustainability factors" means factors that may have a |
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| 1 | | material and relevant financial impact on the safety or | 2 | | performance of an investment and which are complementary to | 3 | | financial factors and financial accounting.
| 4 | | Section 15. Development of sustainable investment | 5 | | policies.
| 6 | | (a) Any public agency or governmental unit should develop, | 7 | | publish, and implement sustainable investment policies | 8 | | applicable to the management of all public funds under its | 9 | | control. The sustainable investment policy may be incorporated | 10 | | in existing investment policies developed, published, and | 11 | | implemented by a public agency or governmental unit.
| 12 | | (b) The sustainable investment policy should include | 13 | | material, relevant, and decision-useful sustainability factors | 14 | | to be considered by the public agency or governmental unit as | 15 | | one component of its overall evaluation of investment | 16 | | decisions. Such factors may include, but are not be limited to: | 17 | | (1) corporate governance and leadership factors; (2) | 18 | | environmental factors; (3) social capital factors; (4) human | 19 | | capital factors; and (5) business model and innovation factors.
| 20 | | Section 20. Consideration of sustainable investment | 21 | | factors in decision-making.
| 22 | | (a) A public agency shall prudently integrate | 23 | | sustainability factors into its investment decision-making, | 24 | | investment analysis, portfolio construction, due diligence, |
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| 1 | | and investment ownership in order to maximize anticipated | 2 | | financial returns, minimize projected risk, and more | 3 | | effectively execute its fiduciary duty.
| 4 | | (b) Sustainability factors may include, but are not limited | 5 | | to, 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 | 14 | | ways, including, but not limited to: (1) direct financial | 15 | | impacts and risks; (2) legal, regulatory, and policy impacts | 16 | | and risks; (3) against industry norms, best practices, and | 17 | | competitive drivers; and (4) stakeholder engagement.
| 18 | | (d) Nothing in this Act prohibits a public agency or | 19 | | governmental unit from integrating additional factors into its | 20 | | investment decision-making, investment analysis, portfolio | 21 | | construction, due diligence, and investment ownership of | 22 | | public funds. This Act shall not apply to financial institution | 23 | | time deposits or financial institution processing services. | 24 | | Section 100. The Deposit of State Moneys Act is amended by | 25 | | changing 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 | 3 | | implement an
investment policy covering the management of all | 4 | | State funds under his or her
control. The investment policy | 5 | | shall be published each year in the Treasurers'
annual report | 6 | | as prescribed in Section 15 of the State Treasurer Act (15 ILCS
| 7 | | 505/15). The policy shall also be published at least once each | 8 | | year in at
least one newspaper of general circulation in both | 9 | | Springfield and Chicago.
Any such investment policy adopted by | 10 | | the Treasurer shall be reviewed, and
updated if necessary, | 11 | | within 90 days following the installation of a new
Treasurer.
| 12 | | The investment policy shall include material, relevant, | 13 | | and decision-useful sustainability factors to be considered by | 14 | | the Treasurer in evaluating investment decisions, including, | 15 | | but not limited to: (1) corporate governance and leadership | 16 | | factors; (2) environmental factors; (3) social capital | 17 | | factors; (4) human capital factors; and (5) business model and | 18 | | innovation factors, as provided under the Illinois Sustainable | 19 | | Investing. | 20 | | (Source: P.A. 89-350, eff. 8-17-95.)
| 21 | | Section 105. The Public Funds Investment Act is amended by | 22 | | changing 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
| 3 | | governed by a written investment policy adopted by the
public
| 4 | | agency. The level of detail and complexity of the investment | 5 | | policy shall be
appropriate to the
nature of the funds, the | 6 | | purpose for the funds, and the amount of the public
funds | 7 | | within the
investment portfolio. The policy shall address | 8 | | safety of principal, liquidity
of funds, and return
on | 9 | | investment and shall require that the investment portfolio be | 10 | | structured in
such manner as to
provide sufficient liquidity to | 11 | | pay obligations as they come due. In addition,
the investment
| 12 | | policy 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 | 5 | | material, relevant, and decision-useful sustainability factors | 6 | | have been or are regularly considered by the agency, within the | 7 | | bounds of financial and fiduciary prudence, in evaluating | 8 | | investment decisions. Such factors include, but are not limited | 9 | | to: (i) corporate governance and leadership factors; (ii) | 10 | | environmental factors; (iii) social capital factors; (iv) | 11 | | human capital factors; and (v) business model and innovation | 12 | | factors, as provided under the Illinois Sustainable Investing | 13 | | Act. | 14 | | (b) For purposes of the State or a county, the investment | 15 | | policy shall be
adopted by the elected treasurer and presented | 16 | | to the chief executive officer
and the governing body. For | 17 | | purposes of any other public agency, the
investment policy | 18 | | shall be adopted by the governing body of the public agency.
| 19 | | (c) The investment policy shall be made available to the | 20 | | public at the main
administrative office of the public agency.
| 21 | | (d) The written investment policy required under this | 22 | | Section 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 | 25 | | changing Section 1-113.6 and by adding Section 1-113.17 as |
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| 1 | | follows:
| 2 | | (40 ILCS 5/1-113.6)
| 3 | | Sec. 1-113.6. Investment policies. Every board of trustees | 4 | | of a pension
fund shall adopt a written investment policy and | 5 | | file a copy of that policy
with the Department of Insurance | 6 | | within 30 days after its adoption. Whenever a
board changes its | 7 | | investment policy, it shall file a copy of the new policy
with | 8 | | the Department within 30 days.
| 9 | | The investment policy shall include a statement that | 10 | | material, relevant, and decision-useful sustainability factors | 11 | | have been or are regularly considered by the board, within the | 12 | | bounds of financial and fiduciary prudence, in evaluating | 13 | | investment decisions. Such factors include, but are not limited | 14 | | to: (1) corporate governance and leadership factors; (2) | 15 | | environmental factors; (3) social capital factors; (4) human | 16 | | capital factors; and (5) business model and innovation factors, | 17 | | as 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 | 21 | | system, pension fund, or investment board subject to this Code | 22 | | shall adopt a written investment policy and file a copy of that | 23 | | policy with the Department of Insurance within 30 days after | 24 | | its adoption. Whenever a board changes its investment policy, |
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| 1 | | it shall file a copy of the new policy with the Department | 2 | | within 30 days. | 3 | | The investment policy shall include material, relevant, | 4 | | and decision-useful sustainability factors to be considered by | 5 | | the board, within the bounds of financial and fiduciary | 6 | | prudence, in evaluating investment decisions. Such factors | 7 | | shall include, but are not limited to: (1) corporate governance | 8 | | and leadership factors; (2) environmental factors; (3) social | 9 | | capital factors; (4) human capital factors; and (5) business | 10 | | model and innovation factors, as provided under the Illinois | 11 | | Sustainable Investing Act.
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