| 1 | 1 | | THE SENATE S.B. NO. 423 THIRTY-SECOND LEGISLATURE, 2023 STATE OF HAWAII A BILL FOR AN ACT relating to the employees' retirement system. BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII: |
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| 3 | 3 | | THE SENATE S.B. NO. 423 |
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| 4 | 4 | | THIRTY-SECOND LEGISLATURE, 2023 |
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| 5 | 5 | | STATE OF HAWAII |
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| 7 | 7 | | THE SENATE |
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| 9 | 9 | | S.B. NO. |
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| 11 | 11 | | 423 |
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| 13 | 13 | | THIRTY-SECOND LEGISLATURE, 2023 |
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| 17 | 17 | | STATE OF HAWAII |
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| 31 | 31 | | A BILL FOR AN ACT |
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| 37 | 37 | | relating to the employees' retirement system. |
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| 43 | 43 | | BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII: |
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| 47 | 47 | | SECTION 1. The legislature finds that the employees' retirement system should divest its investment portfolio of all coal, oil, and gas companies to disassociate the State's interests from that of the fossil fuel industry, to fulfill the State's fiduciary responsibility in light of ongoing divestment by other major fiduciaries such as the Norwegian Sovereign Wealth Fund, and to demonstrate the State's commitment to addressing climate change in practical application. At the 2015 United Nations Climate Change Conference in Paris, France, the nations of the world agreed that climate change presents a palpable danger that must be addressed, and to take all necessary actions to keep the increase in global average temperature within 3.6 degrees Fahrenheit (two degrees Celsius), and within 2.7 degrees Fahrenheit if possible (1.5 degrees Celsius) over the pre-industrial average temperature. To fail to do so represents grave, existential risks to humanity, agriculture, and biodiversity on a global scale in general. The risks to the Hawaiian islands is perhaps even greater in that we are currently unprepared to grow food locally to support our population, and the failure of global agriculture within the next few decades becomes a significant and increasing risk. Despite the findings of the 2015 Paris Accord, the International Energy Agency recently reported that carbon emissions have increased to record levels since 2010, and the agency has projected that continuing this current trend of carbon emissions will lead to approximately double the agreed upon 3.6 degree Fahrenheit limit by 2050, which will result in catastrophic changes in the earth's climate, weather patterns, marine and terrestrial ecosystems and the ability to grow food. This is society's present trajectory barring large-scale and rapid changes in existing patterns of production, consumption, and assessment of economic growth and societal wellbeing in general. Noting the International Energy Agency's report, Bevis Longstreth, a former Commissioner of the United States Securities and Exchange Commission, has recommended divestment of fossil fuel companies as an important strategy to help control carbon emissions and to reduce the financial impact on investment funds resulting from the inevitable policy changes that will be needed to reduce carbon emissions. The announcement in November 2017 by the Norwegian Sovereign Wealth Fund, the largest sovereign wealth fund in the world, of its intention to divest from oil and gas investments, in addition to its prior announcement in 2015 of its divestment from coal investments, should provide sufficient notice to the fiduciaries of the world that a global society predicated upon the continued burning of fossil fuels will without a doubt be headed for collapse, rapid reduction in the use of such fossil fuels and the substitution of renewable energy alternatives is imperative, such reduction and substitution will inevitably adversely impact the market valuation of all fossil fuel companies, and holding such fossil fuel securities can no longer be considered a wise investment. In May 2015, the University of Hawaii board of regents incorporated a policy to divest its endowment funds of fossil fuel investments citing the need to show leadership on the issue of climate change, and the need to address concerns that fossil fuel company values may decrease because the measures taken to address climate change in the future may impede fossil fuel assets from being developed. Additionally, it is the judgment of the legislature that investment in coal, oil, and gas companies can discourage investment in competing renewable energy technologies, and therefore impedes Hawaii from achieving its renewable portfolio standard goal of one hundred per cent by 2045. The purpose of this Act is to require the employees' retirement system to divest its investment portfolio of coal, oil, and gas companies within an unspecified number of years of this Act's effective date. SECTION 2. Definitions. As used in this Act, the following definitions shall apply: "Company" means any sole proprietorship, organization, association, corporation, partnership, joint venture, limited partnership, limited liability partnership, limited liability company, or other entity or business association, including all wholly-owned subsidiaries, majority-owned subsidiaries, parent companies, or affiliates of such entities or business associations, that exists for profit-making purposes. "Direct holdings" means all securities of a company held directly by the public fund or in an account or fund in which the public fund owns all shares or interests. "Fossil fuel company" means a company identified by a Global Industry Classification Standard code in one of the following sectors: (1) Coal and consumable fuels; (2) Integrated oil and gas; or (3) Oil and gas exploration and production. "Indirect holdings" means all securities of a company held in an account or fund, such as a mutual fund, managed by one or more persons not employed by the public fund, in which the public fund owns shares or interests together with other investors not subject to this Act. "Public fund" means the employees' retirement system of the State of Hawaii or the board of trustees in charge of the employees' retirement system. SECTION 3. Identification of companies. (a) By January 1, , the public fund shall make its best efforts to identify all fossil fuel companies in which the public fund has direct or indirect holdings. Those efforts shall include, as appropriate: (1) Reviewing publicly available information regarding fossil fuel companies. In conducting the review, the public fund may rely on information provided by nonprofit organizations, research firms, international organizations, and government entities; (2) Contacting asset managers contracted by the public fund that invest in fossil fuel companies; and (3) Contacting other institutional investors that have divested from fossil fuel companies. (b) By the first meeting of the public fund after January 1, , the public fund shall assemble a fossil fuel companies list of all identified fossil fuel companies in which the public fund has direct holdings. (c) The public fund shall update the fossil fuel companies list on a quarterly basis based on evolving information from, among other sources, those listed in subsection (a). SECTION 4. Required actions. (a) The public fund shall take the following actions in relation to the companies on the fossil fuel companies list in which the fund owns direct or indirect holdings: (1) The public fund shall sell, redeem, divest, or withdraw all publicly-traded securities of each company identified in section 3 according to the following schedule: (A) By July 1, , at least twenty per cent of such assets shall be removed from the public fund's assets under management; (B) By July 1, , at least forty per cent of such assets shall be removed from the public fund's assets under management; (C) By July 1, , at least sixty per cent of such assets shall be removed from the public fund's assets under management; (D) By July 1, , at least eighty per cent of such assets shall be removed from the public fund's assets under management; and (E) By July 1, , one hundred per cent of such assets shall be removed from the public fund's assets under management. (b) At no time shall the public fund acquire new assets or securities of companies on the fossil fuel companies list. (c) Notwithstanding anything in this Act to the contrary, subsections (a) and (b) shall not apply to indirect holdings in actively managed investment funds; provided that the public fund shall submit letters to the managers of such investment funds containing fossil fuel companies informing the managers that the public fund shall be fully divested from fossil fuel companies within five years and that the managers of such investment funds shall provide an alternative within that time period or the public fund shall divest from said actively managed investment funds. (d) The public fund shall also conduct a search of actively managed investment funds with indirect holdings devoid of fossil fuel companies. SECTION 5. Reporting. (a) The public fund shall file a publicly-available report to the legislature that includes the fossil fuel companies list within ninety days after the list is created, but no later than July 1, . (b) Annually thereafter, the public fund shall file a publicly-available report to the legislature that includes: (1) All investments sold, redeemed, divested, or withdrawn in compliance with section 4; (2) All prohibited investments under section 4; and (3) Any progress made under section 4. SECTION 6. Other legal obligations. With respect to actions taken in compliance with this Act, including all good faith determinations regarding companies as required by this Act, the public fund shall be exempt from any conflicting statutory or common law obligations, including any obligations with respect to choice of asset managers, investment funds, or investments for the public fund's securities portfolios. SECTION 7. If any provision of this Act, or the application thereof to any person or circumstance, is held invalid, the invalidity does not affect other provisions or applications of the Act that can be given effect without the invalid provision or application, and to this end the provisions of this Act are severable. SECTION 8. This Act shall take effect upon its approval. INTRODUCED BY: _____________________________ |
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| 48 | 48 | | |
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| 49 | 49 | | SECTION 1. The legislature finds that the employees' retirement system should divest its investment portfolio of all coal, oil, and gas companies to disassociate the State's interests from that of the fossil fuel industry, to fulfill the State's fiduciary responsibility in light of ongoing divestment by other major fiduciaries such as the Norwegian Sovereign Wealth Fund, and to demonstrate the State's commitment to addressing climate change in practical application. |
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| 50 | 50 | | |
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| 51 | 51 | | At the 2015 United Nations Climate Change Conference in Paris, France, the nations of the world agreed that climate change presents a palpable danger that must be addressed, and to take all necessary actions to keep the increase in global average temperature within 3.6 degrees Fahrenheit (two degrees Celsius), and within 2.7 degrees Fahrenheit if possible (1.5 degrees Celsius) over the pre-industrial average temperature. To fail to do so represents grave, existential risks to humanity, agriculture, and biodiversity on a global scale in general. The risks to the Hawaiian islands is perhaps even greater in that we are currently unprepared to grow food locally to support our population, and the failure of global agriculture within the next few decades becomes a significant and increasing risk. |
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| 52 | 52 | | |
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| 53 | 53 | | Despite the findings of the 2015 Paris Accord, the International Energy Agency recently reported that carbon emissions have increased to record levels since 2010, and the agency has projected that continuing this current trend of carbon emissions will lead to approximately double the agreed upon 3.6 degree Fahrenheit limit by 2050, which will result in catastrophic changes in the earth's climate, weather patterns, marine and terrestrial ecosystems and the ability to grow food. This is society's present trajectory barring large-scale and rapid changes in existing patterns of production, consumption, and assessment of economic growth and societal wellbeing in general. |
|---|
| 54 | 54 | | |
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| 55 | 55 | | Noting the International Energy Agency's report, Bevis Longstreth, a former Commissioner of the United States Securities and Exchange Commission, has recommended divestment of fossil fuel companies as an important strategy to help control carbon emissions and to reduce the financial impact on investment funds resulting from the inevitable policy changes that will be needed to reduce carbon emissions. The announcement in November 2017 by the Norwegian Sovereign Wealth Fund, the largest sovereign wealth fund in the world, of its intention to divest from oil and gas investments, in addition to its prior announcement in 2015 of its divestment from coal investments, should provide sufficient notice to the fiduciaries of the world that a global society predicated upon the continued burning of fossil fuels will without a doubt be headed for collapse, rapid reduction in the use of such fossil fuels and the substitution of renewable energy alternatives is imperative, such reduction and substitution will inevitably adversely impact the market valuation of all fossil fuel companies, and holding such fossil fuel securities can no longer be considered a wise investment. |
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| 56 | 56 | | |
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| 57 | 57 | | In May 2015, the University of Hawaii board of regents incorporated a policy to divest its endowment funds of fossil fuel investments citing the need to show leadership on the issue of climate change, and the need to address concerns that fossil fuel company values may decrease because the measures taken to address climate change in the future may impede fossil fuel assets from being developed. |
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| 58 | 58 | | |
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| 59 | 59 | | Additionally, it is the judgment of the legislature that investment in coal, oil, and gas companies can discourage investment in competing renewable energy technologies, and therefore impedes Hawaii from achieving its renewable portfolio standard goal of one hundred per cent by 2045. |
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| 60 | 60 | | |
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| 61 | 61 | | The purpose of this Act is to require the employees' retirement system to divest its investment portfolio of coal, oil, and gas companies within an unspecified number of years of this Act's effective date. |
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| 62 | 62 | | |
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| 63 | 63 | | SECTION 2. Definitions. As used in this Act, the following definitions shall apply: |
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| 64 | 64 | | |
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| 65 | 65 | | "Company" means any sole proprietorship, organization, association, corporation, partnership, joint venture, limited partnership, limited liability partnership, limited liability company, or other entity or business association, including all wholly-owned subsidiaries, majority-owned subsidiaries, parent companies, or affiliates of such entities or business associations, that exists for profit-making purposes. |
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| 66 | 66 | | |
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| 67 | 67 | | "Direct holdings" means all securities of a company held directly by the public fund or in an account or fund in which the public fund owns all shares or interests. |
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| 68 | 68 | | |
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| 69 | 69 | | "Fossil fuel company" means a company identified by a Global Industry Classification Standard code in one of the following sectors: |
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| 70 | 70 | | |
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| 71 | 71 | | (1) Coal and consumable fuels; |
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| 73 | 73 | | (2) Integrated oil and gas; or |
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| 74 | 74 | | |
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| 75 | 75 | | (3) Oil and gas exploration and production. |
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| 76 | 76 | | |
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| 77 | 77 | | "Indirect holdings" means all securities of a company held in an account or fund, such as a mutual fund, managed by one or more persons not employed by the public fund, in which the public fund owns shares or interests together with other investors not subject to this Act. |
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| 78 | 78 | | |
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| 79 | 79 | | "Public fund" means the employees' retirement system of the State of Hawaii or the board of trustees in charge of the employees' retirement system. |
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| 80 | 80 | | |
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| 81 | 81 | | SECTION 3. Identification of companies. (a) By January 1, , the public fund shall make its best efforts to identify all fossil fuel companies in which the public fund has direct or indirect holdings. Those efforts shall include, as appropriate: |
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| 82 | 82 | | |
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| 83 | 83 | | (1) Reviewing publicly available information regarding fossil fuel companies. In conducting the review, the public fund may rely on information provided by nonprofit organizations, research firms, international organizations, and government entities; |
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| 84 | 84 | | |
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| 85 | 85 | | (2) Contacting asset managers contracted by the public fund that invest in fossil fuel companies; and |
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| 86 | 86 | | |
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| 87 | 87 | | (3) Contacting other institutional investors that have divested from fossil fuel companies. |
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| 88 | 88 | | |
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| 89 | 89 | | (b) By the first meeting of the public fund after January 1, , the public fund shall assemble a fossil fuel companies list of all identified fossil fuel companies in which the public fund has direct holdings. |
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| 90 | 90 | | |
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| 91 | 91 | | (c) The public fund shall update the fossil fuel companies list on a quarterly basis based on evolving information from, among other sources, those listed in subsection (a). |
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| 92 | 92 | | |
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| 93 | 93 | | SECTION 4. Required actions. (a) The public fund shall take the following actions in relation to the companies on the fossil fuel companies list in which the fund owns direct or indirect holdings: |
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| 94 | 94 | | |
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| 95 | 95 | | (1) The public fund shall sell, redeem, divest, or withdraw all publicly-traded securities of each company identified in section 3 according to the following schedule: |
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| 96 | 96 | | |
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| 97 | 97 | | (A) By July 1, , at least twenty per cent of such assets shall be removed from the public fund's assets under management; |
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| 98 | 98 | | |
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| 99 | 99 | | (B) By July 1, , at least forty per cent of such assets shall be removed from the public fund's assets under management; |
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| 100 | 100 | | |
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| 101 | 101 | | (C) By July 1, , at least sixty per cent of such assets shall be removed from the public fund's assets under management; |
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| 102 | 102 | | |
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| 103 | 103 | | (D) By July 1, , at least eighty per cent of such assets shall be removed from the public fund's assets under management; and |
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| 104 | 104 | | |
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| 105 | 105 | | (E) By July 1, , one hundred per cent of such assets shall be removed from the public fund's assets under management. |
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| 106 | 106 | | |
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| 107 | 107 | | (b) At no time shall the public fund acquire new assets or securities of companies on the fossil fuel companies list. |
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| 108 | 108 | | |
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| 109 | 109 | | (c) Notwithstanding anything in this Act to the contrary, subsections (a) and (b) shall not apply to indirect holdings in actively managed investment funds; provided that the public fund shall submit letters to the managers of such investment funds containing fossil fuel companies informing the managers that the public fund shall be fully divested from fossil fuel companies within five years and that the managers of such investment funds shall provide an alternative within that time period or the public fund shall divest from said actively managed investment funds. |
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| 110 | 110 | | |
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| 111 | 111 | | (d) The public fund shall also conduct a search of actively managed investment funds with indirect holdings devoid of fossil fuel companies. |
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| 112 | 112 | | |
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| 113 | 113 | | SECTION 5. Reporting. (a) The public fund shall file a publicly-available report to the legislature that includes the fossil fuel companies list within ninety days after the list is created, but no later than July 1, . |
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| 114 | 114 | | |
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| 115 | 115 | | (b) Annually thereafter, the public fund shall file a publicly-available report to the legislature that includes: |
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| 116 | 116 | | |
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| 117 | 117 | | (1) All investments sold, redeemed, divested, or withdrawn in compliance with section 4; |
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| 118 | 118 | | |
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| 119 | 119 | | (2) All prohibited investments under section 4; and |
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| 120 | 120 | | |
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| 121 | 121 | | (3) Any progress made under section 4. |
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| 122 | 122 | | |
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| 123 | 123 | | SECTION 6. Other legal obligations. With respect to actions taken in compliance with this Act, including all good faith determinations regarding companies as required by this Act, the public fund shall be exempt from any conflicting statutory or common law obligations, including any obligations with respect to choice of asset managers, investment funds, or investments for the public fund's securities portfolios. |
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| 124 | 124 | | |
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| 125 | 125 | | SECTION 7. If any provision of this Act, or the application thereof to any person or circumstance, is held invalid, the invalidity does not affect other provisions or applications of the Act that can be given effect without the invalid provision or application, and to this end the provisions of this Act are severable. |
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| 127 | 127 | | SECTION 8. This Act shall take effect upon its approval. |
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| 129 | 129 | | |
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| 130 | 130 | | |
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| 131 | 131 | | INTRODUCED BY: _____________________________ |
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| 133 | 133 | | INTRODUCED BY: |
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| 134 | 134 | | |
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| 135 | 135 | | _____________________________ |
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| 140 | 140 | | |
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| 141 | 141 | | Report Title: Coal; Oil; Gas Company Divestment; Fossil Fuel; ERS Description: Requires the employees' retirement system to divest its investment portfolio of coal, oil, and gas companies within an unspecified number of years and to report certain information to the legislature. The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent. |
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| 146 | 146 | | |
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| 147 | 147 | | Report Title: |
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| 148 | 148 | | |
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| 149 | 149 | | Coal; Oil; Gas Company Divestment; Fossil Fuel; ERS |
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| 150 | 150 | | |
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| 151 | 151 | | |
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| 152 | 152 | | |
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| 153 | 153 | | Description: |
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| 154 | 154 | | |
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| 155 | 155 | | Requires the employees' retirement system to divest its investment portfolio of coal, oil, and gas companies within an unspecified number of years and to report certain information to the legislature. |
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| 156 | 156 | | |
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| 157 | 157 | | |
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| 159 | 159 | | |
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| 160 | 160 | | |
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| 162 | 162 | | |
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| 163 | 163 | | The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent. |
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