First Regular Session of the 123rd General Assembly (2023)
PRINTING CODE. Amendments: Whenever an existing statute (or a section of the Indiana
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between statutes enacted by the 2022 Regular Session of the General Assembly.
HOUSE ENROLLED ACT No. 1008
AN ACT to amend the Indiana Code concerning pensions.
Be it enacted by the General Assembly of the State of Indiana:
SECTION 1. IC 5-10.2-14 IS ADDED TO THE INDIANA CODE
AS A NEW CHAPTER TO READ AS FOLLOWS [EFFECTIVE
JULY 1, 2023]:
Chapter 14. ESG Commitment
Sec. 1. This chapter does not apply to:
(1) a bank holding company (as defined in IC 28-2-16-3 or
IC 28-2-16-9);
(2) a subsidiary of a bank holding company (as defined in
IC 28-2-16-3 or IC 28-2-16-9); or
(3) an action taken or a factor considered pursuant to the
requirements of this chapter by a trustee for a:
(A) bank holding company described in subdivision (1); or
(B) subsidiary of a bank holding company described in
subdivision (2).
Sec. 2. (a) As used in this chapter, "ESG commitment" means
an action taken or a factor considered by a service provider:
(1) with respect to or including the system's assets; and
(2) with the nonfinancial purpose to further social, political,
or ideological interests based on evidence indicating the
purpose.
(b) The term defined in subsection (a) includes a commitment to
further, through portfolio company engagement or board or
shareholder votes, any of the following for nonfinancial purposes
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beyond the applicable law requirements:
(1) Eliminating, reducing, offsetting, or disclosing greenhouse
gas emissions.
(2) Instituting or assessing:
(A) corporate board;
(B) employment;
(C) composition;
(D) compensation; or
(E) disclosure;
criteria that incorporate characteristics protected under
IC 22-9.
(3) Divesting from, limiting investment in, or limiting the
activities or investments of a company that does any of the
following:
(A) Fails to meet or does not commit to environmental
standards or disclosures.
(B) Engages in, facilitates, or supports the manufacture,
import, distribution, marketing or advertising, sale, or
lawful use of firearms, ammunition, or component parts
and accessories of firearms or ammunition.
(C) Contracts with the United States Immigration and
Customs Enforcement for the provision of federal
immigration detention centers or support services related
to the implementation of federal immigration and border
security laws, regulations, and policies.
(D) Engages in the exploration, production, utilization,
transportation, sale, or manufacturing of fossil fuel based
energy, timber, mining, agriculture, and food animal
production.
Sec. 3. (a) As used in this chapter, "financial" means a prudent
determination by a fiduciary to have a material effect on the
monetary risk or the monetary return of an investment.
(b) The term does not include an action taken or a factor
considered by a fiduciary with the nonfinancial purpose to further
social, political, or ideological interests as set forth in section 2 of
this chapter.
Sec. 4. As used in this chapter, "service provider" means
investment managers and proxy advisors to the system.
Sec. 5. (a) As used in this chapter and except as provided in
subsection (b), "system" refers to the Indiana public retirement
system established by IC 5-10.5-2-1.
(b) The term does not include the following:
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(1) The public employees' defined contribution plan
established under IC 5-10.3-12.
(2) An annuity savings account for the public employees'
retirement fund established under IC 5-10.2-2-2(a)(1).
(3) The teachers' defined contribution plan established under
IC 5-10.4-8.
(4) An annuity savings account for the Indiana state teachers'
retirement fund established under IC 5-10.2-2-2(c)(1).
(5) The legislators' defined contribution plan established
under IC 2-3.5-5.
Sec. 6. Factors to be considered as evidence of a service
provider's ESG commitment may include one (1) or more of the
following:
(1) Advertising.
(2) Statements.
(3) Explanations.
(4) Reports.
(5) Letters to clients.
(6) Communications with portfolio companies.
(7) Statements of principles.
(8) Participation in, affiliation with, or status as a signatory
to:
(A) a coalition;
(B) an initiative;
(C) a joint statement of principles; or
(D) an agreement.
Sec. 7. If the treasurer of state has reasonable cause to believe
that a service provider has made an ESG commitment, the
treasurer of state shall research the matter and make a
determination as to whether the service provider has made an ESG
commitment. In conducting this research, the treasurer of state
shall attempt to consult with the service provider and consider any
information the service provider provides to the treasurer of state.
If the treasurer of state concludes that the service provider has
made an ESG commitment, the treasurer of state shall provide the:
(1) name of the service provider; and
(2) research supporting the conclusion;
to the board.
Sec. 8. (a) Except as otherwise provided by law, the board may
not make an investment decision with the purpose of:
(1) influencing any social or environmental policy; or
(2) attempting to influence the governance of any corporation
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for nonfinancial purposes.
(b) Except as otherwise provided by law, the system is
prohibited from making an ESG commitment with respect to
system assets, including without limitation in the selection of
investments, selection of investment managers, management or
oversight of investments, proxy voting, or shareholder engagement.
Sec. 9. (a) In making and supervising investments of the system,
the board shall discharge its duties solely in the financial interest
of the participants and beneficiaries of the system for the exclusive
purposes of:
(1) providing financial benefits to participants and
beneficiaries; and
(2) defraying reasonable expenses of administering the
system.
(b) The board, in accordance with the fiduciary duties described
in this article, shall make investment decisions with the primary
purpose of maximizing the target rate of return on the board's
investments.
Sec. 10. (a) In accordance with the board's duty under section
9 of this chapter, and except as provided in subsection (c), the
board shall not:
(1) enter a contract; or
(2) modify, amend, or continue a contract;
with a service provider that has made an ESG commitment unless
taking the action described in subdivisions (1) and (2) violates the
board's fiduciary duty to the system's participants and
beneficiaries.
(b) The board shall replace a service provider that has made an
ESG commitment with a service provider that is comparable in
financial performance, so as not to violate the board's fiduciary
duty to the system's participants and beneficiaries. If the board
replaces a service provider, it shall do so within a reasonable time,
but not later than one hundred eighty (180) days after receiving
notice from the treasurer of state of the service provider's ESG
commitment.
(c) If the board determines that there is not a comparable
service provider to replace a service provider under subsection (b),
the board shall continue contracting with the service provider that
has made an ESG commitment. The board shall include in its
minutes the:
(1) decision that a comparable service provider does not exist;
and
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(2) evidence supporting the decision under subdivision (1).
Sec. 11. The board shall, at least annually, tabulate and report
all proxy votes made by a service provider that is not a private
market fund (as defined in IC 5-10.2-10-11) in relation to the
administration of the system. For each vote reported, the report
must contain:
(1) a vote caption;
(2) the fund's vote;
(3) the recommendation of the portfolio company's
management; and
(4) if applicable, the recommendation of a proxy advisor or
other service provider.
Sec. 12. (a) The following are immune from civil liability for any
act or omission related to any action under this chapter:
(1) The state.
(2) Officers, agents, and employees of the state.
(3) The system.
(4) The:
(A) board members;
(B) executive director;
(C) officers;
(D) agents; and
(E) employees;
of the system.
(b) In addition to the immunity provided under subsection (a),
the following are entitled to indemnification from the system for all
losses, costs, and expenses, including reasonable attorney's fees,
associated with defending against any claim or suit relating to an
act authorized under this chapter:
(1) Officers, agents, and employees of the state.
(2) The:
(A) board members;
(B) executive director;
(C) officers;
(D) agents; and
(E) employees;
of the system.
Sec. 13. This chapter does not apply directly to the defined
contribution plans or an annuity savings account described in
section 5(b) of this chapter or a private market fund (as defined in
IC 5-10.2-10-11). However, the board shall:
(1) ensure that reasonable efforts are made during the due
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diligence process before an investment is made and in
monitoring investments in:
(A) the public employees' defined contribution plan
established under IC 5-10.3-12;
(B) an annuity savings account for the public employees'
retirement fund established under IC 5-10.2-2-2(a)(1);
(C) the teachers' defined contribution plan established
under IC 5-10.4-8;
(D) an annuity savings account for the Indiana state
teachers' retirement fund established under
IC 5-10.2-2-2(c)(1);
(E) the legislators' defined contribution plan established
under IC 2-3.5-5; or
(F) a private market fund (as defined in IC 5-10.2-10-11);
to determine whether any investments would violate section
9 of this chapter; and
(2) take appropriate action, if necessary, consistent with the
board's fiduciary duties.
SECTION 2. IC 5-10.5-5-1, AS AMENDED BY P.L.86-2018,
SECTION 19, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
JULY 1, 2023]: Sec. 1. The board has the powers, duties, restrictions,
limitations, and penalties in connection with the board's investment and
management of the assets of the public pension and retirement funds
of the system under the following provisions:
(1) IC 5-10.2-2-2.5.
(2) IC 5-10.2-2-13.
(3) IC 5-10.3-3-7.1.
(4) IC 5-10.3-5-3.
(5) IC 5-10.3-5-3.1.
(6) IC 5-10.3-5-4.
(7) IC 5-10.3-5-5.
(8) IC 5-10.3-5-6.
(9) IC 5-10.4-3-7.
(10) IC 5-10.4-3-9.
(11) IC 5-10.4-3-10.
(12) IC 5-10.4-3-11.
(13) IC 5-10.4-3-12.
(14) IC 5-10.4-3-13.
(15) IC 5-10.4-3-14.
(16) IC 5-10.4-3-15.
(17) IC 5-10.4-3-16.
(18) IC 5-10.2-14.
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SECTION 3. IC 34-30-2.1-36.6 IS ADDED TO THE INDIANA
CODE AS A NEW SECTION TO READ AS FOLLOWS
[EFFECTIVE JULY 1, 2023]: Sec. 36.6. IC 5-10.2-14-12 (Concerning
the Indiana public retirement system).
HEA 1008 — Concur Speaker of the House of Representatives
President of the Senate
President Pro Tempore
Governor of the State of Indiana
Date: Time:
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