CHAPTER 120
Legislative Research Commission PDF Version
1
CHAPTER 120
( SB 205 )
AN ACT relating to state dealings with companies that engage in energy company boycotts.
Be it enacted by the General Assembly of the Commonwealth of Kentucky:
SECTION 1. A NEW SECTION OF KRS CHAPTER 41 IS CREATED TO READ AS FOLLOWS:
The General Assembly finds that:
(1) Fossil fuels currently supply more than eighty percent (80%) of the world’s primary energy, and the United
States Energy Information Administration still projects global consumption of fossil fuels to increase
steadily at least through 2050;
(2) Restricting the supply of fossil fuels, without an immediate substitute for those fuels, only serves to raise
prices on energy consumers, profoundly impacting the poorest among us;
(3) Denying financing to American and European fossil energy producers, who are among the most socially
and environmentally responsible companies in the world, only serves to support hostile nations and less
responsible producers;
(4) Banks are increasingly denying financing to creditworthy fossil energy companies solely for the purpose of
decarbonizing their lending portfolios and marketing their environmental credentials, to the detriment of
potential returns for their shareholders;
(5) Institutional investors are divesting from fossil energy companies and pressuring corporations to commit to
the goal of the Paris Agreement to reduce greenhouse gas emissions to zero by 2050;
(6) Large investment firms are colluding to force fossil energy companies to cannibalize their existing
businesses and direct time and attention away from increasing shareholder returns;
(7) Corporations are boycotting fossil energy companies by refusing to provide them with products or services;
and
(8) Energy-producing states, when financially prudent, should avoid doing business with companies that are
attacking the industries that substantially contribute to their state budgets.
SECTION 2. A NEW SECTION OF KRS CHAPTER 41 IS CREATED TO READ AS FOLLOWS:
(1) As used in Sections 1 to 4 of this Act:
(a) "Company" means a for-profit sole proprietorship, organization, association, corporation,
partnership, joint venture, limited partnership, limited liability partnership, limited liability company,
or other entity or business association, including a wholly owned subsidiary, majority-owned
subsidiary, parent company, or affiliate of those entities or business associations, that exists to make
a profit;
(b) "Direct holdings" means, with respect to a financial company, all securities of that financial
company held directly by a state governmental entity in an account or fund in which a state
governmental entity owns all shares or interests;
(c) "Energy company boycott" means, without an ordinary business purpose, refusing to deal with,
terminating business activities with, or otherwise taking any action that is intended to penalize, inflict
economic harm on, or limit commercial relations with a company because the company:
1. Engages in the exploration, production, utilization, transportation, sale, or manufacturing of
fossil fuel-based energy and does not commit or pledge to meet environmental standards
beyond applicable federal and state law; or
2. Does business with a company described in subparagraph 1. of this paragraph;
(d) "Financial company" means a publicly traded financial services, banking, or investment company;
(e) "Indirect holdings" means, with respect to a financial company, all securities of that financial
company held in an account or fund, such as a mutual fund, managed by one (1) or more persons ACTS OF THE GENERAL ASSEMBLY 2
not employed by a state governmental entity, in which the state governmental entity owns shares or
interests together with other investors not subject to the provisions of this chapter. The term does not
include money invested under a plan described by Section 401(k) or 457 of the Internal Revenue
Code;
(f) "Listed financial company" means a financial company listed by the Treasurer;
(g) "State governmental entity" means any state board, bureau, cabinet, commission, department,
authority, officer, or other entity in the executive branch of state government that makes investments,
deposits, or transactions in excess of one million dollars ($1,000,000) annually; and
(h) "Treasurer" means the State Treasurer.
(2) Notwithstanding any provision of law to the contrary, with respect to actions taken in compliance with
Sections 1 to 4 of this Act, including all good faith determinations regarding financial companies as
required by Sections 1 to 4 of this Act, a state governmental entity and the Treasurer are exempt from any
conflicting statutory or common law obligations, including any obligations with respect to making
investments, divesting from any investment, preparing or maintaining any list of financial companies, or
choosing asset managers, investment funds, or investments for the state governmental entity’s securities
portfolios.
(3) A state governmental entity shall not be subject to the requirements of Sections 1 to 4 of this Act if the state
governmental entity determines that the requirements would be inconsistent with its fiduciary responsibility
with respect to the investment of entity assets or other duties imposed by law relating to the investment of
entity assets.
SECTION 3. A NEW SECTION OF KRS CHAPTER 41 IS CREATED TO READ AS FOLLOWS:
(1) (a) The Treasurer shall prepare and maintain, and provide to each state governmental entity through
publication on the Treasurer's official Web site, a list of all financial companies that, to the
Treasurer's knowledge, have engaged in energy company boycotts. In maintaining the list, the
Treasurer may:
1. Review and rely, as appropriate in the Treasurer’s judgment, on all available information
regarding financial companies, including information provided by the Commonwealth,
nonprofit organizations, research firms, international organizations, governmental entities, or
other organizations in the business of providing information relevant for investments; and
2. Request written verification from a financial company that it does not engage in energy
company boycotts and rely on, as appropriate in the Treasurer’s judgment and without
conducting further investigation, research, or inquiry, a financial company’s written response
to the request.
(b) A financial company that fails to provide to the Treasurer a written verification under paragraph
(a)2. of this subsection within sixty (60) days of receiving the request from the Treasurer is presumed
to be engaging in energy company boycotts.
(c) The Treasurer shall update the list required in paragraph (a) of this subsection annually or more
often as the Treasurer considers necessary based on information from, among other sources, those
listed in paragraph (a) of this subsection.
(d) Within thirty (30) days of the date the list of financial companies that engage in energy company
boycotts is first provided or updated, the Treasurer shall file the list with the Legislative Research
Commission and the Attorney General and post the list on a publicly available Internet Web site.
(2) Within thirty (30) days of a state governmental entity receiving the list provided under subsection (1)(a) of
this section, the state governmental entity shall notify the Treasurer of the listed financial companies in
which the state governmental entity owns direct or indirect holdings. Receipt of the list by the state
governmental entity shall be presumed upon the publication of the list on the Treasurer's official Web site.
(3) (a) For each listed financial company identified under subsection (2) of this section, the state
governmental entity shall send a written notice:
1. Informing the financial company of its status as a listed financial company; CHAPTER 120
Legislative Research Commission PDF Version
3
2. Warning the financial company that it may become subject to divestment by state
governmental entities after the expiration of the period described by paragraph (b) of this
subsection; and
3. Offering the financial company the opportunity to clarify its activities related to companies
that are engaged in energy company boycotts.
(b) Within ninety (90) days of the financial company receiving notice under paragraph (a) of this
subsection, the financial company must cease engaging in energy company boycotts in order to avoid
becoming subject to divestment by state governmental entities.
(c) If, during the time provided by paragraph (b) of this subsection, the financial company ceases
engaging in energy company boycotts, and the Treasurer is made aware of the cessation, the
Treasurer shall remove the financial company from the list maintained under subsection (1)(a) of
this subsection, and Sections 2, 3, and 4 of this Act shall no longer apply to the financial company
unless it resumes engaging in energy company boycotts.
(d) If, after the time provided by paragraph (b) of this subsection expires, the financial company
continues to engage in energy company boycotts, the state governmental entity shall sell, redeem,
divest, or withdraw all publicly traded securities of the financial company, except securities described
in subsection (5) of this section, according to the schedule provided in subsection (4) of this section.
(4) (a) A state governmental entity shall sell, redeem, divest, or withdraw all publicly traded securities of a
listed financial company within one (1) year of the expiration of the time period provided in
subsection (3)(b) of this section.
(b) If a financial company that ceased engaging in energy company boycotts after receiving notice under
subsection (3) of this section resumes its boycott, the state governmental entity shall send a written
notice to the financial company informing it that the state governmental entity will sell, redeem,
divest, or withdraw all publicly traded securities of the financial company according to the schedule
in paragraph (a) of this subsection.
(c) A state governmental entity may delay the schedule for divestment under paragraph (a) of this
subsection only to the extent that the state governmental entity determines, in the state governmental
entity’s good faith judgment, and consistent with the entity’s fiduciary duty, that divestment from
listed financial companies will likely result in a loss in value or a benchmark deviation described in
subsection (6) of this section.
(d) If a state governmental entity delays the schedule for divestment under paragraph (c) of this
subsection, the state governmental entity shall submit a report within thirty (30) days of the decision
to the Treasurer, the Legislative Research Commission, and the Attorney General stating the reasons
and justification for the state governmental entity’s delay in divestment from listed financial
companies. The report shall include documentation, including objective numerical estimates,
supporting its determination that the divestment would result in a loss in value or a benchmark
deviation described by subsection (6) of this section.
(5) A state governmental entity shall not be required to divest from any indirect holdings in actively or passively
managed investment funds or private equity funds. The state governmental entity shall submit the list of all
financial companies that have engaged in energy company boycotts to each investment fund manager and
request that if any of those companies are present within their funds, they remove those financial
companies from the fund or create a similar actively or passively managed fund with indirect holdings
devoid of listed financial companies. If a manager creates a similar fund with substantially the same
management fees and same level of investment risk and anticipated return, the state governmental entity
may replace all applicable investments with investments in the similar fund in a time frame consistent with
prudent fiduciary standards but not later than the four hundred fifty (450) days after the date the fund is
created.
(6) (a) A state governmental entity may cease divesting from one (1) or more listed financial companies only
if reasonable evidence shows that:
1. The state governmental entity has suffered or will suffer a material financial loss as a result of
having to divest from listed financial companies under this section; or ACTS OF THE GENERAL ASSEMBLY 4
2. An individual portfolio that uses a benchmark-aware strategy would be subject to an
aggregate expected deviation from its benchmark as a result of having to divest from listed
financial companies under this section.
(b) A state governmental entity may cease divesting from a listed financial company as provided by this
section only to the extent necessary to ensure that the state governmental entity does not suffer a loss
in value or deviate from its benchmark as described by paragraph (a) of this subsection.
(c) Before a state governmental entity may cease divesting from a listed financial company under this
section, the state governmental entity shall provide a written report to the Treasurer, the Legislative
Research Commission, and the Attorney General setting forth the reason and justification, supported
by reasonable evidence, for deciding to cease divestment or to remain invested in a listed financial
company.
(d) This section shall not apply to reinvestment in a financial company that is no longer a listed financial
company under subsection (1) of this section.
SECTION 4. A NEW SECTION OF KRS CHAPTER 41 IS CREATED TO READ AS FOLLOWS:
(1) No later than December 1, 2023, and each December 1 thereafter, each state governmental entity shall file a
publicly available report with the Treasurer, the Legislative Research Commission, and the Attorney
General that:
(a) Identifies all securities sold, redeemed, divested, or withdrawn in compliance with subsection (4) of
Section 3 of this Act; and
(b) Summarizes any changes made under subsection (5) of Section 3 of this Act.
(2) The Attorney General or the Treasurer may bring any civil action necessary to enforce Sections 1 to 4 and 5
of this Act.
SECTION 5. A NEW SECTION OF KRS CHAPTER 41 IS CREATED TO READ AS FOLLOWS:
(1) As used in this section:
(a) "Company" has the same meaning as in Section 2 of this Act, except that it shall not include a sole
proprietorship;
(b) "Energy company boycott" has the same meaning as in Section 2 of this Act; and
(c) "Governmental entity" means any state board, bureau, cabinet, commission, department, authority,
officer, or other entity in the executive branch of state government.
(2) This section applies only to a contract that:
(a) Is between a governmental entity and a company with ten (10) or more full-time employees; and
(b) Has a value of one hundred thousand dollars ($100,000) or more that is to be paid wholly or partly
from public funds of the governmental entity.
(3) Except as provided in subsection (4) of this section, a governmental entity shall not enter into a contract
with a company for goods or services unless the contract contains a written verification from the company
that it:
(a) Does not engage in energy companies boycotts; and
(b) Will not engage in energy company boycotts during the term of the contract.
(4) The requirements of subsection (3) of this section shall not apply to a governmental entity that determines
that those requirements are inconsistent with the governmental entity's constitutional, statutory, or
fiduciary duties related to the issuance, incurrence, or management of debt obligations or the deposit,
custody, management, borrowing, or investment of funds.
Section 6. KRS 286.2-015 is amended to read as follows:
(1) Except as provided in Sections 1 to 4 and 5 of this Act, all political subdivisions of the Commonwealth shall
be prohibited from enacting and from enforcing ordinances, resolutions, and regulations pertaining to the
financial or lending activities of persons or entities which:
(a) Are subject to the jurisdiction of the department or the provisions of this chapter; CHAPTER 120
Legislative Research Commission PDF Version
5
(b) Are subject to the jurisdiction or regulatory supervision of the Board of Governors of the Federal
Reserve System, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, the
National Credit Union Administration, the Farm Credit Administration, the Federal Deposit Insurance
Corporation, or the United States Department of Housing and Urban Development; or
(c) Originate, purchase, sell, assign, securitize, assist, facilitate, or service property interests or obligations
created by financial transactions or loans made, executed, or originated by persons or entities referred to
in paragraph (a) or (b) of this subsection.
(2) The requirements of this section shall apply to all ordinances, resolutions, or regulations pertaining to lending
activities, including any ordinances, resolutions, or regulations which limit or disqualify persons or entities
from doing business with a political subdivision based upon financial or lending activities or the imposition of
additional reporting requirements or other obligations on such persons or entities seeking to do business with a
political subdivision.
(3) Any provision of this chapter preempted by federal law with respect to a national bank or federal savings
association shall not apply to the same extent to an operating subsidiary of a national bank or federal savings
association.
(4) The provisions of this chapter shall be interpreted and applied to the fullest extent practicable in a manner
consistent with applicable federal laws and regulations and with applicable policies and orders of federal
regulatory agencies and shall not be deemed to constitute an attempt to override federal law.
(5) Nothing in this section shall be interpreted as preventing the enforcement of ordinances, regulations, or
resolutions of political subdivisions of the Commonwealth pertaining to civil rights.
Signed by Governor April 8, 2022.