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AN ACT relating to state dealings with companies that engage in energy company 1
boycotts. 2
Be it enacted by the General Assembly of the Commonwealth of Kentucky: 3
SECTION 1. A NEW SECTION OF KRS CHAPTER 41 IS CREATED TO 4
READ AS FOLLOWS: 5
The General Assembly finds that: 6
(1) Fossil fuels currently supply more than eighty percent (80%) of the world’s 7
primary energy, and the United States Energy Information Administration still 8
projects global consumption of fossil fuels to increase steadily at least through 9
2050; 10
(2) Restricting the supply of fossil fuels, without an immediate substitute for those 11
fuels, only serves to raise prices on energy consumers, profoundly impacting the 12
poorest among us; 13
(3) Denying financing to American and European fossil energy producers, who are 14
among the most socially and environmentally responsible companies in the 15
world, only serves to support hostile nations and less responsible producers; 16
(4) Banks are increasingly denying financing to creditworthy fossil energy 17
companies solely for the purpose of decarbonizing their lending portfolios and 18
marketing their environmental credentials, to the detriment of potential returns 19
for their shareholders; 20
(5) Institutional investors are divesting from fossil energy companies and pressuring 21
corporations to commit to the goal of the Paris Agreement to reduce greenhouse 22
gas emissions to zero by 2050; 23
(6) Large investment firms are colluding to force fossil energy companies to 24
cannibalize their existing businesses and direct time and attention away from 25
increasing shareholder returns; 26
(7) Corporations are boycotting fossil energy companies by refusing to provide them 27 UNOFFICIAL COPY 22 RS BR 1560
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with products or services; and 1
(8) Energy-producing states, when financially prudent, should avoid doing business 2
with companies that are attacking the industries that substantially contribute to 3
their state budgets. 4
SECTION 2. A NEW SECTION OF KRS CHAPTER 41 IS CREATED TO 5
READ AS FOLLOWS: 6
(1) As used in Sections 1 to 4 of this Act: 7
(a) "Company" means a for -profit sole proprietorship, organization, 8
association, corporation, partnership, joint venture, limited partnership, 9
limited liability partnership, limited liability company, or other entity or 10
business association, including a wholly owned subsidiary, majority-owned 11
subsidiary, parent company, or affiliate of those entities or business 12
associations, that exists to make a profit; 13
(b) "Direct holdings" means, with respect to a financial company, all securities 14
of that financial company held directly by a state governmental entity in an 15
account or fund in which a state governmental entity owns all shares or 16
interests; 17
(c) "Energy company boycott" means, without an ordinary business purpose, 18
refusing to deal with, terminating business activities with, or otherwise 19
taking any action that is intended to penalize, inflict economic harm on, or 20
limit commercial relations with a company because the company: 21
1. Engages in the exploration, production, utilization, transportation, 22
sale, or manufacturing of fossil fuel-based energy and does not 23
commit or pledge to meet environmental standards beyond applicable 24
federal and state law; or 25
2. Does business with a company described in subparagraph 1. of this 26
paragraph; 27 UNOFFICIAL COPY 22 RS BR 1560
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(d) "Financial company" means a publicly traded financial services, banking, 1
or investment company; 2
(e) "Indirect holdings" means, with respect to a financial company, all 3
securities of that financial company held in an account or fund, such as a 4
mutual fund, managed by one (1) or more persons not employed by a state 5
governmental entity, in which the state governmental entity owns shares or 6
interests together with other investors not subject to the provisions of this 7
chapter. The term does not include money invested under a plan described 8
by Section 401(k) or 457 of the Internal Revenue Code; 9
(f) "Listed financial company" means a financial company listed by the 10
Treasurer; 11
(g) "State governmental entity" means any state board, bureau, cabinet, 12
commission, department, authority, officer, or other entity in the executive 13
branch of state government that makes investments, deposits, or 14
transactions in excess of one million dollars ($1,000,000) annually; and 15
(h) "Treasurer" means the State Treasurer. 16
(2) Notwithstanding any provision of law to the contrary, with respect to actions 17
taken in compliance with Sections 1 to 4 of this Act, including all good faith 18
determinations regarding financial companies as required by Sections 1 to 4 of 19
this Act, a state governmental entity and the Treasurer are exempt from any 20
conflicting statutory or common law obligations, including any obligations with 21
respect to making investments, divesting from any investment, preparing or 22
maintaining any list of financial companies, or choosing asset managers, 23
investment funds, or investments for the state governmental entity’s securities 24
portfolios. 25
(3) A state governmental entity shall not be subject to the requirements of Sections 1 26
to 4 of this Act if the state governmental entity determines that the requirements 27 UNOFFICIAL COPY 22 RS BR 1560
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would be inconsistent with its fiduciary responsibility with respect to the 1
investment of entity assets or other duties imposed by law relating to the 2
investment of entity assets. 3
SECTION 3. A NEW SECTION OF KRS CHAPTER 41 IS CREATED TO 4
READ AS FOLLOWS: 5
(1) (a) The Treasurer shall prepare and maintain, and provide to each state 6
governmental entity through publication on the Treasurer's official Web 7
site, a list of all financial companies that have engaged in energy company 8
boycotts. In maintaining the list, the Treasurer may: 9
1. Review and rely, as appropriate in the Treasurer’s judgment, on all 10
available information regarding financial companies, including 11
information provided by the Commonwealth, nonprofit organizations, 12
research firms, international organizations, governmental entities, or 13
other organizations in the business of providing information relevant 14
for investments; and 15
2. Request written verification from a financial company that it does not 16
engage in energy company boycotts and rely on, as appropriate in the 17
Treasurer’s judgment and without conducting further investigation, 18
research, or inquiry, a financial company’s written response to the 19
request. 20
(b) A financial company that fails to provide to the Treasurer a written 21
verification under paragraph (a)2. of this subsection within sixty (60) days 22
of receiving the request from the Treasurer is presumed to be engaging in 23
energy company boycotts. 24
(c) The Treasurer shall update the list required in paragraph (a) of this 25
subsection annually or more often as the Treasurer considers necessary 26
based on information from, among other sources, those listed in paragraph 27 UNOFFICIAL COPY 22 RS BR 1560
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(a) of this subsection. 1
(d) Within thirty (30) days of the date the list of financial companies that 2
engage in energy company boycotts is first provided or updated, the 3
Treasurer shall file the list with the Legislative Research Commission and 4
the Attorney General and post the list on a publicly available Internet Web 5
site. 6
(2) Within thirty (30) days of a state governmental entity receiving the list provided 7
under subsection (1)(a) of this section, the state governmental entity shall notify 8
the Treasurer of the listed financial companies in which the state governmental 9
entity owns direct or indirect holdings. 10
(3) (a) For each listed financial company identified under subsection (2) of this 11
section, the state governmental entity shall send a written notice: 12
1. Informing the financial company of its status as a listed financial 13
company; 14
2. Warning the financial company that it may become subject to 15
divestment by state governmental entities after the expiration of the 16
period described by paragraph (b) of this subsection; and 17
3. Offering the financial company the opportunity to clarify its activities 18
related to companies that are engaged in energy company boycotts. 19
(b) Within ninety (90) days of the financial company receiving notice under 20
paragraph (a) of this subsection, the financial company must cease 21
engaging in energy company boycotts in order to avoid becoming subject to 22
divestment by state governmental entities. 23
(c) If, during the time provided by paragraph (b) of this subsection, the 24
financial company ceases engaging in energy company boycotts, the 25
Treasurer shall remove the financial company from the list maintained 26
under subsection (1)(a) of this subsection, and Sections 2, 3, and 4 of this 27 UNOFFICIAL COPY 22 RS BR 1560
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Act shall no longer apply to the financial company unless it resumes 1
engaging in energy company boycotts. 2
(d) If, after the time provided by paragraph (b) of this subsection expires, the 3
financial company continues to engage in energy company boycotts, the 4
state governmental entity shall sell, redeem, divest, or withdraw all publicly 5
traded securities of the financial company, except securities described in 6
subsection (5) of this section, according to the schedule provided in 7
subsection (4) of this section. 8
(4) (a) A state governmental entity shall sell, redeem, divest, or withdraw all 9
publicly traded securities of a listed financial company within one (1) year 10
of the expiration of the time period provided in subsection (3)(b) of this 11
section. 12
(b) If a financial company that ceased engaging in energy company boycotts 13
after receiving notice under subsection (3) of this section resumes its 14
boycott, the state governmental entity shall send a written notice to the 15
financial company informing it that the state governmental entity will sell, 16
redeem, divest, or withdraw all publicly traded securities of the financial 17
company according to the schedule in paragraph (a) of this subsection. 18
(c) A state governmental entity may delay the schedule for divestment under 19
paragraph (a) of this subsection only to the extent that the state 20
governmental entity determines, in the state governmental entity’s good 21
faith judgment, and consistent with the entity’s fiduciary duty, that 22
divestment from listed financial companies will likely result in a loss in 23
value or a benchmark deviation described in subsection (6) of this section. 24
(d) If a state governmental entity delays the schedule for divestment under 25
paragraph (c) of this subsection, the state governmental entity shall submit 26
a report within thirty (30) days of the decision to the Treasurer, the 27 UNOFFICIAL COPY 22 RS BR 1560
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Legislative Research Commission, and the Attorney General stating the 1
reasons and justification for the state governmental entity’s delay in 2
divestment from listed financial companies. The report shall include 3
documentation, including objective numerical estimates, supporting its 4
determination that the divestment would result in a loss in value or a 5
benchmark deviation described by subsection (6) of this section. 6
(5) A state governmental entity shall not be required to divest from any indirect 7
holdings in actively or passively managed investment funds or private equity 8
funds. The state governmental entity shall submit the list of all financial 9
companies that have engaged in energy company boycotts to each investment 10
fund manager and request that if any of those companies are present within their 11
funds, they remove those financial companies from the fund or create a similar 12
actively or passively managed fund with indirect holdings devoid of listed 13
financial companies. If a manager creates a similar fund with substantially the 14
same management fees and same level of investment risk and anticipated return, 15
the state governmental entity may replace all applicable investments with 16
investments in the similar fund in a time frame consistent with prudent fiduciary 17
standards but not later than the four hundred fifty (450) days after the date the 18
fund is created. 19
(6) (a) A state governmental entity may cease divesting from one (1) or more listed 20
financial companies only if reasonable evidence shows that: 21
1. The state governmental entity has suffered or will suffer a material 22
financial loss as a result of having to divest from listed financial 23
companies under this section; or 24
2. An individual portfolio that uses a benchmark-aware strategy would 25
be subject to an aggregate expected deviation from its benchmark as a 26
result of having to divest from listed financial companies under this 27 UNOFFICIAL COPY 22 RS BR 1560
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section. 1
(b) A state governmental entity may cease divesting from a listed financial 2
company as provided by this section only to the extent necessary to ensure 3
that the state governmental entity does not suffer a loss in value or deviate 4
from its benchmark as described by paragraph (a) of this subsection. 5
(c) Before a state governmental entity may cease divesting from a listed 6
financial company under this section, the state governmental entity shall 7
provide a written report to the Treasurer, the Legislative Research 8
Commission, and the Attorney General setting forth the reason and 9
justification, supported by reasonable evidence, for deciding to cease 10
divestment or to remain invested in a listed financial company. 11
(d) This section shall not apply to reinvestment in a financial company that is 12
no longer a listed financial company under subsection (1) of this section. 13
SECTION 4. A NEW SECTION OF KRS CHAPTER 41 IS CREATED TO 14
READ AS FOLLOWS: 15
(1) No later than December 1, 2023, and each December 1 thereafter, each state 16
governmental entity shall file a publicly available report with the Treasurer, the 17
Legislative Research Commission, and the Attorney General that: 18
(a) Identifies all securities sold, redeemed, divested, or withdrawn in 19
compliance with subsection (4) of Section 3 of this Act; and 20
(b) Summarizes any changes made under subsection (5) of Section 3 of this 21
Act. 22
(2) The Attorney General or the Treasurer may bring any action necessary to enforce 23
Sections 1 to 4 and 5 of this Act. 24
SECTION 5. A NEW SECTION OF KRS CHAPTER 41 IS CREATED TO 25
READ AS FOLLOWS: 26
(1) As used in this section: 27 UNOFFICIAL COPY 22 RS BR 1560
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(a) "Company" has the same meaning as in Section 2 of this Act, except that it 1
shall not include a sole proprietorship; 2
(b) "Energy company boycott" has the same meaning as in Section 2 of this 3
Act; and 4
(c) "Governmental entity" means any state agency or political subdivision of 5
the Commonwealth. 6
(2) This section applies only to a contract that: 7
(a) Is between a governmental entity and a company with ten (10) or more full-8
time employees; and 9
(b) Has a value of one hundred thousand dollars ($100,000) or more that is to 10
be paid wholly or partly from public funds of the governmental entity. 11
(3) Except as provided in subsection (4) of this section, a governmental entity shall 12
not enter into a contract with a company for goods or services unless the contract 13
contains a written verification from the company that it: 14
(a) Does not engage in energy companies boycotts; and 15
(b) Will not engage in energy company boycotts during the term of the contract. 16
(4) The requirements of subsection (3) of this section shall not apply to a 17
governmental entity that determines that those requirements are inconsistent with 18
the governmental entity's constitutional, statutory, or fiduciary duties related to 19
the issuance, incurrence, or management of debt obligations or the deposit, 20
custody, management, borrowing, or investment of funds. 21
Section 6. KRS 286.2-015 is amended to read as follows: 22
(1) Except as provided in Sections 1 to 4 and 5 of this Act, all political subdivisions of 23
the Commonwealth shall be prohibited from enacting and from enforcing 24
ordinances, resolutions, and regulations pertaining to the financial or lending 25
activities of persons or entities which: 26
(a) Are subject to the jurisdiction of the department or the provisions of this 27 UNOFFICIAL COPY 22 RS BR 1560
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chapter; 1
(b) Are subject to the jurisdiction or regulatory supervision of the Board of 2
Governors of the Federal Reserve System, the Office of the Comptroller of the 3
Currency, the Office of Thrift Supervision, the National Credit Union 4
Administration, the Farm Credit Administration, the Federal Deposit 5
Insurance Corporation, or the United States Department of Housing and Urban 6
Development; or 7
(c) Originate, purchase, sell, assign, securitize, assist, facilitate, or service 8
property interests or obligations created by financial transactions or loans 9
made, executed, or originated by persons or entities referred to in paragraph 10
(a) or (b) of this subsection. 11
(2) The requirements of this section shall apply to all ordinances, resolutions, or 12
regulations pertaining to lending activities, including any ordinances, resolutions, or 13
regulations which limit or disqualify persons or entities from doing business with a 14
political subdivision based upon financial or lending activities or the imposition of 15
additional reporting requirements or other obligations on such persons or entities 16
seeking to do business with a political subdivision. 17
(3) Any provision of this chapter preempted by federal law with respect to a national 18
bank or federal savings association shall not apply to the same extent to an 19
operating subsidiary of a national bank or federal savings association. 20
(4) The provisions of this chapter shall be interpreted and applied to the fullest extent 21
practicable in a manner consistent with applicable federal laws and regulations and 22
with applicable policies and orders of federal regulatory agencies and shall not be 23
deemed to constitute an attempt to override federal law. 24
(5) Nothing in this section shall be interpreted as preventing the enforcement of 25
ordinances, regulations, or resolutions of political subdivisions of the 26
Commonwealth pertaining to civil rights. 27