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| Public Act 103-0324 | ||||
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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 5. The Illinois Sustainable Investing Act is | ||||
amended by changing Sections 10 and 20 as follows: | ||||
(30 ILCS 238/10)
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Sec. 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 manager" means: | ||||
(1) a fiduciary selected by a public agency, pension | ||||
fund, retirement system or governmental unit who has the | ||||
power to manage, acquire, or dispose of any asset of a | ||||
public agency, pension fund, retirement system or | ||||
governmental unit; | ||||
(2) has acknowledged in writing that he or she is a | ||||
fiduciary with respect to the public fund, retirement | ||||
system or pension fund; and | ||||
(3) is at least one of the following: (i) registered | ||||
as an investment adviser under the federal Investment | ||||
Advisers Act of 1940; (ii) registered as an investment | ||
adviser under the Illinois Securities Law of 1953; (iii) a | ||
bank, as defined in the Investment Advisers Act of 1940; | ||
or (iv) an insurance company authorized to transact | ||
business in this State. | ||
"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 | ||
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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(Source: P.A. 101-473, eff. 1-1-20.) | ||
(30 ILCS 238/20)
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Sec. 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, | ||
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 | ||
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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(e) Beginning January 1, 2024, investment managers shall | ||
disclose, prior to the award of a contract, a description of | ||
any process through which the manager prudently integrates the | ||
sustainability factors described in subsection (b) into their | ||
investment decision-making, investment analysis, portfolio | ||
construction, due diligence, and investment ownership in order | ||
to maximize anticipated risk-adjusted financial returns, | ||
identify projected risk, and execute the manager's fiduciary | ||
duties. Investment managers shall provide this disclosure to | ||
each public agency, pension fund, retirement system, or | ||
governmental unit for whom the investment manager is seeking | ||
selection as a fiduciary before acting in this official | ||
capacity. | ||
(Source: P.A. 101-473, eff. 1-1-20.)
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