Public Act 101-0473
 
HB2460 EnrolledLRB101 10083 RJF 55186 b


  
    AN ACT concerning finance.
  
 
    Be it enacted by the People of the State of Illinois,
 
represented in the General Assembly:
  
 
 
    Section 1. Short title. This Act may be cited as the 
Illinois Sustainable Investing Act.
 
    Section 5. Findings and purpose.
 
    (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.

    (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.

 
    Section 10. Definitions.  As used in this Act:
  
 
    "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.
   
    "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.
    
    "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.
   
    "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.
   
    "Sustainability factors" means factors that may have a 
material and relevant financial impact on the safety or 
performance of an investment and which are complementary to 
financial factors and financial accounting.

 
    Section 15. Development of sustainable investment 
policies.
 
    (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.

    (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.

 
    Section 20. Consideration of sustainable investment 
factors in decision-making.
 
    (a)    A public agency shall 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, minimize projected risk, and more 
effectively execute its fiduciary duty.

    (b)   Sustainability factors may include, but are not limited 
to, the following:
    
        (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.
     
        (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.
     
        (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.
     
        (4)   Human capital factors that recognize that the 
    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.
     
        (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.

    (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.

    (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.
 
    Section 100. The Deposit of State Moneys Act is amended  by 
changing Section 22.8 as follows:
 



    (15 ILCS 520/22.8)



    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

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.

    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.)

 
    Section 105. The Public Funds Investment Act is amended  by 
changing Section 2.5 as follows:
 



    (30 ILCS 235/2.5)



    Sec. 2.5. Investment policy. 

    (a) Investment of public funds by a public
agency shall be

governed by a written investment policy adopted by the
public

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

policy shall include or address the following:


        (1) a listing of authorized investments;


        (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;


        (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;


        (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;


        (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, 
    guidelines for contractual arrangements for the custody 
    and
safekeeping of that collateral;


        (6) a policy regarding the establishment of a system of 
    internal controls
and written operational
procedures

    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;


        (7) identification of the chief investment officer who

    is responsible for establishing the internal controls and

    written procedures for
the operation of the investment 
    program;


        (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;


        (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;


        (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;


        (11) a policy regarding the selection of investment 
    advisors, money
managers, and financial institutions; and


        (12) a policy regarding ethics and conflicts of 
    interest.

    (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.

    (c) The investment policy shall be made available to the 
public at the main
administrative office of the public agency.

    (d) The written investment policy required under this 
Section shall be
developed and implemented by
January 1, 2000.

(Source: P.A. 90-688, eff. 7-31-98.)

 
    Section 110. The Illinois Pension Code is amended  by 
changing Section 1-113.6 and  by adding Section 1-113.17 as 
follows:
 



    (40 ILCS 5/1-113.6)



    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.

    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.)

 
    (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, 
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.