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AN ACT relating to state dealings with companies that engage in politically 1
sensitive company boycotts. 2
Be it enacted by the General Assembly of the Commonwealth of Kentucky: 3
Section 1. KRS 41.472 is amended to read as follows: 4
(1) As used in KRS 41.470 to 41.476: 5
(a) "Agricultural commodities associated company" means a company that: 6
1. Engages in the legal production, processing, collection, manufacture, 7
or sale of any animal or animal products, including but not limited to 8
honey, dairy products, fish, and meat and does not commit or pledge to 9
meet environmental or regulatory standards beyond applicable federal 10
and state law; 11
2. Engages in the legal cultivation, production, processing, collection, 12
distillation, fermentation, or manufacture of any crop or agricultural 13
product, including but not limited to alcohol, tobacco, hemp, and 14
forestry products and does not commit or pledge to meet 15
environmental or regulatory standards beyond applicable federal and 16
state law; or 17
3. Does business with a company described in subparagraph 1. or 2. of 18
this paragraph; 19
(b) "Company" means a for-profit sole proprietorship, organization, association, 20
corporation, partnership, joint venture, limited partnership, limited liability 21
partnership, limited liability company, or other entity or business association, 22
including a wholly owned subsidiary, majority-owned subsidiary, parent 23
company, or affiliate of those entities or business associations, that exists to 24
make a profit; 25
(c)[(b)] "Direct holdings" means, with respect to a financial company, all 26
securities of that financial company held directly by a state governmental 27 UNOFFICIAL COPY 23 RS BR 1712
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entity in an account or fund in which a state governmental entity owns all 1
shares or interests; 2
(d)[(c)] "Energy services associated company[ boycott]" means[, without an 3
ordinary business purpose, refusing to deal with, terminating business 4
activities with, or otherwise taking any action that is intended to penalize, 5
inflict economic harm on, or limit commercial relations with] a company 6
that[because the company]: 7
1. Engages in the exploration, production, utilization, transportation, sale, 8
or manufacturing of fossil fuel-based energy and does not commit or 9
pledge to meet environmental standards beyond applicable federal and 10
state law; or 11
2. Does business with a company described in subparagraph 1. of this 12
paragraph; 13
(e)[(d)] "Financial company" means a publicly traded financial services, 14
banking, or investment company; 15
(f) "Firearms goods or services associated company" means a company that: 16
1. Engages in the legal manufacture, customization, distribution, 17
wholesale, supply, or retail sale of firearms, firearm accessories, or 18
ammunition, or which operates an area for the discharge or other use 19
of firearms for silhouette, skeet, trap, black powder, target, self-20
defense, demonstration, education, or similar recreational shooting 21
purposes at which not fewer than twenty (20) different individuals 22
discharge firearms each calendar year and does not commit or pledge 23
to meet firearms regulatory standards beyond applicable federal and 24
state law; or 25
2. Does business with a company described in subparagraph 1. of this 26
paragraph; 27 UNOFFICIAL COPY 23 RS BR 1712
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(g)[(e)] "Indirect holdings" means, with respect to a financial company, all 1
securities of that financial company held in an account or fund, such as a 2
mutual fund, managed by one (1) or more persons not employed by a state 3
governmental entity, in which the state governmental entity owns shares or 4
interests together with other investors not subject to the provisions of this 5
chapter. The term does not include money invested under a plan described by 6
Section 401(k) or 457 of the Internal Revenue Code; 7
(h)[(f)] "Listed financial company" means a financial company listed by the 8
Treasurer; 9
(i) "Petrochemical commodities associated company" means a company that: 10
1. Engages in the legal exploration, production, utilization, 11
transportation, refinement, processing, manufacture, application, or 12
sale of petrochemicals and does not commit or pledge to meet 13
environmental or regulatory standards beyond applicable federal and 14
state law; or 15
2. Does business with a company described in subparagraph 1. of this 16
paragraph; 17
(j) "Politically sensitive company boycott" means, without an ordinary 18
business purpose, including compliance with federal, state, or local law or 19
regulation, refusing to trade goods or services with, terminating existing 20
business activities with, or otherwise taking any action that is intended to 21
penalize, inflict economic harm on, or limit commercial relations with any: 22
1. Agricultural commodities associated company; 23
2. Energy services associated company; 24
3. Firearms goods or services associated company; 25
4. Petrochemical commodities associated company; 26
5. Social media information or internet service provider associated 27 UNOFFICIAL COPY 23 RS BR 1712
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company; or 1
6. Other company, due to its third-party, legal business associations with 2
a company described by subparagraphs 1., 2., 3., 4., or 5. of this 3
paragraph; 4
(k) "Social media information or internet service provider associated 5
company" means a company that: 6
1. Engages in any legal digital information distribution, as protected 7
under 47 U.S.C. sec 230(c)1 or the First Amendment of the United 8
States Constitution, and which does not commit or pledge to meet 9
content moderation standards, with the exception of pornography and 10
pervasive vulgarity, beyond applicable federal and state law; or 11
2. Does business with a company described in subparagraph 1. of this 12
paragraph; 13
(l)[(g)] "State governmental entity" means any state board, bureau, cabinet, 14
commission, department, authority, officer, or other entity in the executive 15
branch of state government that makes investments, deposits, or transactions 16
in excess of one million dollars ($1,000,000) annually; and 17
(m)[(h)] "Treasurer" means the State Treasurer. 18
(2) Notwithstanding any provision of law to the contrary, with respect to actions taken 19
in compliance with KRS 41.470 to 41.476, including all good-faith determinations 20
regarding financial companies as required by KRS 41.470 to 41.476, a state 21
governmental entity and the Treasurer are exempt from any conflicting statutory or 22
common law obligations, including any obligations with respect to making 23
investments, divesting from any investment, preparing or maintaining any list of 24
financial companies, or choosing asset managers, investment funds, or investments 25
for the state governmental entity's securities portfolios. 26
(3) A state governmental entity shall not be subject to the requirements of KRS 41.470 27 UNOFFICIAL COPY 23 RS BR 1712
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to 41.476 if the state governmental entity determines that the requirements would 1
be inconsistent with its fiduciary responsibility with respect to the investment of 2
entity assets or other duties imposed by law relating to the investment of entity 3
assets. 4
Section 2. KRS 41.474 is amended to 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 7
website[Web site], lists by category[a list] of all financial companies that, to 8
the Treasurer's knowledge, have engaged in any politically sensitive[energy] 9
company boycotts. In maintaining the list, the Treasurer may: 10
1. Review and rely, as appropriate in the Treasurer's judgment, on all 11
available information regarding financial companies, including 12
information provided by the Commonwealth, nonprofit organizations, 13
research firms, international organizations, governmental entities, or 14
other organizations in the business of providing information relevant for 15
investments; and 16
2. Request written verification from a financial company that it does not 17
engage in any politically sensitive[energy] company boycotts and rely 18
on, as appropriate in the Treasurer's judgment and without conducting 19
further investigation, research, or inquiry, a financial company's written 20
response to the request. 21
(b) A financial company that fails to provide to the Treasurer a written 22
verification under paragraph (a)2. of this subsection within sixty (60) days of 23
receiving the request from the Treasurer is presumed to be engaging in any 24
politically sensitive[energy] company boycotts. 25
(c) The Treasurer shall update the list required in paragraph (a) of this subsection 26
annually or more often as the Treasurer considers necessary based on 27 UNOFFICIAL COPY 23 RS BR 1712
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information from, among other sources, those listed in paragraph (a) of this 1
subsection. 2
(d) Within thirty (30) days of the date the list of financial companies that engage 3
in any politically sensitive[energy] company boycotts is first provided or 4
updated, the Treasurer shall file the list with the Legislative Research 5
Commission and the Attorney General and post the list on a publicly available 6
website[Internet Web site]. 7
(2) Within thirty (30) days of a state governmental entity receiving the list provided 8
under subsection (1)(a) of this section, the state governmental entity shall notify the 9
Treasurer of the listed financial companies in which the state governmental entity 10
owns direct or indirect holdings. Receipt of the list by the state governmental entity 11
shall be presumed upon the publication of the list on the Treasurer's official 12
website[Web site]. 13
(3) (a) For each listed financial company identified under subsection (2) of this 14
section, the state governmental entity shall send a written notice: 15
1. Informing the financial company of its status as a listed financial 16
company; 17
2. Warning the financial company that it may become subject to 18
divestment by state governmental entities after the expiration of the 19
period described by paragraph (b) of this subsection; and 20
3. Offering the financial company the opportunity to clarify its activities 21
related to companies that are engaged in any politically 22
sensitive[energy] company boycotts. 23
(b) Within ninety (90) days of the financial company receiving notice under 24
paragraph (a) of this subsection, the financial company must cease engaging 25
in any politically sensitive[energy] company boycotts in order to avoid 26
becoming subject to divestment by state governmental entities. 27 UNOFFICIAL COPY 23 RS BR 1712
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(c) If, during the time provided by paragraph (b) of this subsection, the financial 1
company ceases engaging in any politically sensitive[energy] company 2
boycotts, and the Treasurer is made aware of the cessation, the Treasurer shall 3
remove the financial company from the list maintained under subsection 4
(1)(a) of this subsection, and this section and KRS 41.472 and 41.476 shall no 5
longer apply to the financial company unless it resumes engaging in any 6
politically sensitive[energy] company boycotts. 7
(d) If, after the time provided by paragraph (b) of this subsection expires, the 8
financial company continues to engage in any politically sensitive[energy] 9
company boycotts, the state governmental entity shall sell, redeem, divest, or 10
withdraw all publicly traded securities of the financial company, except 11
securities described in subsection (5) of this section, according to the schedule 12
provided in subsection (4) of this section. 13
(4) (a) A state governmental entity shall sell, redeem, divest, or withdraw all publicly 14
traded securities of a listed financial company within one (1) year of the 15
expiration of the time period provided in subsection (3)(b) of this section. 16
(b) If a financial company that ceased engaging in any politically 17
sensitive[energy] company boycotts after receiving notice under subsection 18
(3) of this section resumes its boycott, the state governmental entity shall send 19
a written notice to the financial company informing it that the state 20
governmental entity will sell, redeem, divest, or withdraw all publicly traded 21
securities of the financial company according to the schedule in paragraph (a) 22
of this subsection. 23
(c) A state governmental entity may delay the schedule for divestment under 24
paragraph (a) of this subsection only to the extent that the state governmental 25
entity determines, in the state governmental entity's good-faith judgment, and 26
consistent with the entity's fiduciary duty, that divestment from listed 27 UNOFFICIAL COPY 23 RS BR 1712
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financial companies will likely result in a loss in value or a benchmark 1
deviation described in subsection (6) of this section. 2
(d) If a state governmental entity delays the schedule for divestment under 3
paragraph (c) of this subsection, the state governmental entity shall submit a 4
report within thirty (30) days of the decision to the Treasurer, the Legislative 5
Research Commission, and the Attorney General stating the reasons and 6
justification for the state governmental entity's delay in divestment from listed 7
financial companies. The report shall include documentation, including 8
objective numerical estimates, supporting its determination that the 9
divestment would result in a loss in value or a benchmark deviation described 10
by subsection (6) of this section. 11
(5) A state governmental entity shall not be required to divest from any indirect 12
holdings in actively or passively managed investment funds or private equity funds. 13
The state governmental entity shall submit the list of all financial companies that 14
have engaged in any politically sensitive[energy] company boycotts to each 15
investment fund manager and request that if any of those companies are present 16
within their funds, they remove those financial companies from the fund or create a 17
similar actively or passively managed fund with indirect holdings devoid of listed 18
financial companies. If a manager creates a similar fund with substantially the same 19
management fees and same level of investment risk and anticipated return, the state 20
governmental entity may replace all applicable investments with investments in the 21
similar fund in a time frame consistent with prudent fiduciary standards but not 22
later than the four hundred fifty (450) days after the date the fund is created. 23
(6) (a) A state governmental entity may cease divesting from one (1) or more listed 24
financial companies only if reasonable evidence shows that: 25
1. The state governmental entity has suffered or will suffer a material 26
financial loss as a result of having to divest from listed financial 27 UNOFFICIAL COPY 23 RS BR 1712
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companies under this section; or 1
2. An individual portfolio that uses a benchmark-aware strategy would be 2
subject to an aggregate expected deviation from its benchmark as a 3
result of having to divest from listed financial companies under this 4
section. 5
(b) A state governmental entity may cease divesting from a listed financial 6
company as provided by this section only to the extent necessary to ensure 7
that the state governmental entity does not suffer a loss in value or deviate 8
from its benchmark as described by paragraph (a) of this subsection. 9
(c) Before a state governmental entity may cease divesting from a listed financial 10
company under this section, the state governmental entity shall provide a 11
written report to the Treasurer, the Legislative Research Commission, and the 12
Attorney General setting forth the reason and justification, supported by 13
reasonable evidence, for deciding to cease divestment or to remain invested in 14
a listed financial company. 15
(d) This section shall not apply to reinvestment in a financial company that is no 16
longer a listed financial company under subsection (1) of this section. 17
Section 3. KRS 41.480 is amended to read as follows: 18
(1) As used in this section: 19
(a) "Agricultural commodities associated company" has the same meaning as 20
in Section 1 of this Act; 21
(b) "Company" has the same meaning as in KRS 41.472, except that it shall not 22
include a sole proprietorship; 23
(c)[(b)] "Energy services associated company[ boycott]" has the same meaning 24
as in KRS 41.472;[ and] 25
(d) "Firearms goods or services associated company" has the same meaning as 26
in Section 1 of this Act; 27 UNOFFICIAL COPY 23 RS BR 1712
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(e)[(c)] "Governmental entity" means any state board, bureau, cabinet, 1
commission, department, authority, officer, or other entity in the executive 2
branch of state government; 3
(f) "Petrochemical commodities associated company" has the same meaning 4
as in Section 1 of this Act; 5
(g) "Politically sensitive company boycott" has the same meaning as in Section 6
1 of this Act; and 7
(h) "Social media information or internet service provider associated 8
company" has the same meaning as in Section 1 of this Act. 9
(2) This section applies only to a contract that: 10
(a) Is between a governmental entity and a company with ten (10) or more full-11
time employees; and 12
(b) Has a value of one hundred thousand dollars ($100,000) or more that is to be 13
paid wholly or partly from public funds of the governmental entity. 14
(3) Except as provided in subsection (4) or (5) of this section, a governmental entity 15
shall not enter into a contract with a company for goods or services unless the 16
contract contains a written verification from the company that it: 17
(a) Does not engage in any politically sensitive[energy] companies boycotts; and 18
(b) Will not engage in any politically sensitive[energy] company boycotts during 19
the term of the contract. 20
(4) The requirements of subsection (3) of this section shall not apply to a governmental 21
entity that determines that those requirements are inconsistent with the 22
governmental entity's constitutional, statutory, or fiduciary duties related to the 23
issuance, incurrence, or management of debt obligations or the deposit, custody, 24
management, borrowing, or investment of funds. 25
(5) If the requirements of subsection (3) of this section require any company to 26
violate religious beliefs explicitly stated in the company charter, the company 27 UNOFFICIAL COPY 23 RS BR 1712
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shall provide: 1
(a) Written documentation containing the relevant portion of the company's 2
charter; 3
(b) A written explanation of which type, or types, of politically sensitive 4
company the company has boycotted, does boycott, or will boycott over any 5
portion of the contract; and 6
(c) Written verification, consistent with subsection (3) of this section, that the 7
company does not, and will not, engage in any boycott of the remaining 8
types of companies during the term of the contract. 9
(6) Upon the Treasurer's verification of the information provided by a company 10
under subsection (5) of this section, the company shall not be advantaged or 11
disadvantaged in the contracting process for noncompliance with the provisions 12
of this section that violate its religious beliefs. 13