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| Public Act 101-0473
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| HB2460 Enrolled | LRB101 10083 RJF 55186 b |
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AN ACT concerning finance.
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Be it enacted by the People of the State of Illinois,
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represented in the General Assembly:
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Section 1. Short title. This Act may be cited as the |
Illinois Sustainable Investing Act.
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Section 5. Findings and purpose.
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(a) The General Assembly finds that consideration of |
factors relevant to the environmental impact, social impact, |
and governance of investments is vital for maximizing the |
safety and performance of public funds. Such sustainability |
factors are indicative of the overall performance of an |
investment and are strong indicators of its long-term value. |
Public agencies and governments have a duty to recognize and |
evaluate these materially relevant factors.
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(b) It is the purpose of this Act to prudently integrate |
sustainability factors into the investment decision-making, |
investment analysis, portfolio construction, due diligence, |
and investment ownership of public funds to maximize |
anticipated financial returns, minimize projected risks, more |
effectively execute fiduciary duties, and contribute to a more |
just, accountable, and sustainable State of Illinois.
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Section 10. Definitions. As used in this Act:
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"Financial institution" means a bank, savings bank, or |
credit union established under the laws of the State of |
Illinois, another state, or the United States of America. |
"Governmental unit" has the same meaning as in the Local |
Government Debt Reform Act.
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"Investment policy" means a written investment policy |
adopted by a public agency or governmental unit which addresses |
safety of principal, liquidity of funds, and return on |
investment and which requires the investment portfolio be |
structured in such a manner as to provide sufficient liquidity |
to pay obligations as they come due.
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"Public agency" means the State of Illinois, the various |
counties, townships, cities, towns, villages, school |
districts, educational service regions, special road |
districts, public water supply districts, fire protection |
districts, drainage districts, levee districts, sewer |
districts, housing authorities, the Illinois Bank Examiners' |
Education Foundation, the Chicago Park District, and all other |
political corporations or subdivisions of the State of |
Illinois, now or hereafter created, whether herein |
specifically mentioned or not.
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"Public funds" means current operating funds, special |
funds, interest and sinking funds, and funds of any kind or |
character belonging to or in the custody of any public agency.
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"Sustainability factors" means factors that may have a |
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material and relevant financial impact on the safety or |
performance of an investment and which are complementary to |
financial factors and financial accounting.
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Section 15. Development of sustainable investment |
policies.
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(a) Any public agency or governmental unit should develop, |
publish, and implement sustainable investment policies |
applicable to the management of all public funds under its |
control. The sustainable investment policy may be incorporated |
in existing investment policies developed, published, and |
implemented by a public agency or governmental unit.
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(b) The sustainable investment policy should include |
material, relevant, and decision-useful sustainability factors |
to be considered by the public agency or governmental unit as |
one component of its overall evaluation of investment |
decisions. Such factors may include, but are not be limited to: |
(1) corporate governance and leadership factors; (2) |
environmental factors; (3) social capital factors; (4) human |
capital factors; and (5) business model and innovation factors.
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Section 20. Consideration of sustainable investment |
factors in decision-making.
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(a) A public agency shall prudently integrate |
sustainability factors into its investment decision-making, |
investment analysis, portfolio construction, due diligence, |
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and investment ownership in order to maximize anticipated |
financial returns, minimize projected risk, and more |
effectively execute its fiduciary duty.
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(b) Sustainability factors may include, but are not limited |
to, the following:
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(1) Corporate governance and leadership factors, such |
as the independence of boards and auditors, the expertise |
and competence of corporate boards and executives, |
systemic risk management practices, executive compensation |
structures, transparency and reporting, leadership |
diversity, regulatory and legal compliance, shareholder |
rights, and ethical conduct.
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(2) Environmental factors that may have an adverse or |
positive financial impact on investment performance, such |
as greenhouse gas emissions, air quality, energy |
management, water and wastewater management, waste and |
hazardous materials management, and ecological impacts.
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(3) Social capital factors that impact relationships |
with key outside parties, such as customers, local |
communities, the public, and the government, which may |
impact investment performance. Social capital factors |
include human rights, customer welfare, customer privacy, |
data security, access and affordability, selling practices |
and product labeling, community reinvestment, and |
community relations.
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(4) Human capital factors that recognize that the |
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workforce is an important asset to delivering long-term |
value, including factors such as labor practices, |
responsible contractor and responsible bidder policies, |
employee health and safety, employee engagement, diversity |
and inclusion, and incentives and compensation.
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(5) Business model and innovation factors that reflect |
an ability to plan and forecast opportunities and risks, |
and whether a company can create long-term shareholder |
value, including factors such as supply chain management, |
materials sourcing and efficiency, business model |
resilience, product design and life cycle management, and |
physical impacts of climate change.
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(c) Sustainability factors may be analyzed in a variety of |
ways, including, but not limited to: (1) direct financial |
impacts and risks; (2) legal, regulatory, and policy impacts |
and risks; (3) against industry norms, best practices, and |
competitive drivers; and (4) stakeholder engagement.
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(d) Nothing in this Act prohibits a public agency or |
governmental unit from integrating additional factors into its |
investment decision-making, investment analysis, portfolio |
construction, due diligence, and investment ownership of |
public funds. This Act shall not apply to financial institution |
time deposits or financial institution processing services.
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Section 100. The Deposit of State Moneys Act is amended by |
changing Section 22.8 as follows:
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(15 ILCS 520/22.8)
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Sec. 22.8.
The Treasurer shall develop, publish, and |
implement an
investment policy covering the management of all |
State funds under his or her
control. The investment policy |
shall be published each year in the Treasurers'
annual report |
as prescribed in Section 15 of the State Treasurer Act (15 ILCS
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505/15). The policy shall also be published at least once each |
year in at
least one newspaper of general circulation in both |
Springfield and Chicago.
Any such investment policy adopted by |
the Treasurer shall be reviewed, and
updated if necessary, |
within 90 days following the installation of a new
Treasurer.
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The investment policy shall include material, relevant, |
and decision-useful sustainability factors to be considered by |
the Treasurer in evaluating investment decisions, including, |
but not limited to: (1) corporate governance and leadership |
factors; (2) environmental factors; (3) social capital |
factors; (4) human capital factors; and (5) business model and |
innovation factors, as provided under the Illinois Sustainable |
Investing. |
(Source: P.A. 89-350, eff. 8-17-95.)
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Section 105. The Public Funds Investment Act is amended by |
changing Section 2.5 as follows:
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(30 ILCS 235/2.5)
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Sec. 2.5. Investment policy.
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(a) Investment of public funds by a public
agency shall be
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governed by a written investment policy adopted by the
public
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agency. The level of detail and complexity of the investment |
policy shall be
appropriate to the
nature of the funds, the |
purpose for the funds, and the amount of the public
funds |
within the
investment portfolio. The policy shall address |
safety of principal, liquidity
of funds, and return
on |
investment and shall require that the investment portfolio be |
structured in
such manner as to
provide sufficient liquidity to |
pay obligations as they come due. In addition,
the investment
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policy shall include or address the following:
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(1) a listing of authorized investments;
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(2) a rule, such as the "prudent person rule", |
establishing the standard
of care that must
be maintained |
by the persons investing the public funds;
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(3) investment guidelines that are appropriate to the |
nature of the
funds, the
purpose for the funds, and the |
amount of the public funds within the investment
portfolio;
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(4) a policy regarding diversification of the |
investment portfolio
that is
appropriate to the nature of |
the funds, the purpose for the funds, and the
amount of the |
public
funds within the investment portfolio;
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(5) guidelines regarding collateral requirements, if |
any, for the
deposit of public funds in a financial |
institution made pursuant to this Act,
and, if applicable, |
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guidelines for contractual arrangements for the custody |
and
safekeeping of that collateral;
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(6) a policy regarding the establishment of a system of |
internal controls
and written operational
procedures
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designed to prevent losses of funds that might arise from |
fraud, employee
error, misrepresentation by third parties, |
or imprudent actions by employees of
the entity;
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(7) identification of the chief investment officer who
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is responsible for establishing the internal controls and
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written procedures for
the operation of the investment |
program;
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(8) performance measures that are appropriate to the |
nature of the funds,
the purpose
for the funds, and the |
amount of the public funds within the investment
portfolio;
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(9) a policy regarding appropriate periodic review of |
the investment
portfolio, its
effectiveness in meeting the |
public agency's needs for safety, liquidity,
rate of |
return, and
diversification, and its general performance;
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(10) a policy establishing at least quarterly written |
reports of
investment
activities by the
public agency's |
chief financial officer for submission to the governing |
body
and chief executive
officer of the public agency. The |
reports shall include information regarding
securities in |
the
portfolio by class or
type, book value, income earned, |
and market value as of the report date;
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(11) a policy regarding the selection of investment |
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advisors, money
managers, and financial institutions; and
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(12) a policy regarding ethics and conflicts of |
interest.
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(a-5) The investment policy shall include a statement that |
material, relevant, and decision-useful sustainability factors |
have been or are regularly considered by the agency, within the |
bounds of financial and fiduciary prudence, in evaluating |
investment decisions. Such factors include, but are not limited |
to: (i) corporate governance and leadership factors; (ii) |
environmental factors; (iii) social capital factors; (iv) |
human capital factors; and (v) business model and innovation |
factors, as provided under the Illinois Sustainable Investing |
Act. |
(b) For purposes of the State or a county, the investment |
policy shall be
adopted by the elected treasurer and presented |
to the chief executive officer
and the governing body. For |
purposes of any other public agency, the
investment policy |
shall be adopted by the governing body of the public agency.
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(c) The investment policy shall be made available to the |
public at the main
administrative office of the public agency.
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(d) The written investment policy required under this |
Section shall be
developed and implemented by
January 1, 2000.
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(Source: P.A. 90-688, eff. 7-31-98.)
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Section 110. The Illinois Pension Code is amended by |
changing Section 1-113.6 and by adding Section 1-113.17 as |
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follows:
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(40 ILCS 5/1-113.6)
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Sec. 1-113.6. Investment policies. Every board of trustees |
of a pension
fund shall adopt a written investment policy and |
file a copy of that policy
with the Department of Insurance |
within 30 days after its adoption. Whenever a
board changes its |
investment policy, it shall file a copy of the new policy
with |
the Department within 30 days.
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The investment policy shall include a statement that |
material, relevant, and decision-useful sustainability factors |
have been or are regularly considered by the board, within the |
bounds of financial and fiduciary prudence, in evaluating |
investment decisions. Such factors include, but are not limited |
to: (1) corporate governance and leadership factors; (2) |
environmental factors; (3) social capital factors; (4) human |
capital factors; and (5) business model and innovation factors, |
as provided under the Illinois Sustainable Investing Act. |
(Source: P.A. 90-507, eff. 8-22-97.)
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(40 ILCS 5/1-113.17 new) |
Sec. 1-113.17. Investment sustainability. Every retirement |
system, pension fund, or investment board subject to this Code |
shall adopt a written investment policy and file a copy of that |
policy with the Department of Insurance within 30 days after |
its adoption. Whenever a board changes its investment policy, |
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it shall file a copy of the new policy with the Department |
within 30 days. |
The investment policy shall include material, relevant, |
and decision-useful sustainability factors to be considered by |
the board, within the bounds of financial and fiduciary |
prudence, in evaluating investment decisions. Such factors |
shall include, but are not limited to: (1) corporate governance |
and leadership factors; (2) environmental factors; (3) social |
capital factors; (4) human capital factors; and (5) business |
model and innovation factors, as provided under the Illinois |
Sustainable Investing Act.
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