101ST GENERAL ASSEMBLY
State of Illinois
2019 and 2020
HB3428

 

Introduced , by Rep. Elizabeth Hernandez

 

SYNOPSIS AS INTRODUCED:
 
40 ILCS 5/1-110.16

    Amends the General Provisions Article of the Illinois Pension Code. Requires the Illinois Investment Policy Board to make its best efforts to identify all for-profit companies that contract to shelter migrant children and include those companies in the list of restricted companies for purposes of investment distributed to each retirement system and the Illinois State Board of Investment. Effective immediately.


LRB101 11065 RPS 56269 b

FISCAL NOTE ACT MAY APPLY
PENSION IMPACT NOTE ACT MAY APPLY

 

 

A BILL FOR

 

HB3428LRB101 11065 RPS 56269 b

1    AN ACT concerning public employee benefits.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Illinois Pension Code is amended by changing
5Section 1-110.16 as follows:
 
6    (40 ILCS 5/1-110.16)
7    Sec. 1-110.16. Transactions prohibited by retirement
8systems; companies that boycott Israel, for-profit companies
9that contract to shelter migrant children, Iran-restricted
10companies, Sudan-restricted companies, and expatriated
11entities.
12    (a) As used in this Section:
13        "Boycott Israel" means engaging in actions that are
14    politically motivated and are intended to penalize,
15    inflict economic harm on, or otherwise limit commercial
16    relations with the State of Israel or companies based in
17    the State of Israel or in territories controlled by the
18    State of Israel.
19        "Company" means any sole proprietorship, organization,
20    association, corporation, partnership, joint venture,
21    limited partnership, limited liability partnership,
22    limited liability company, or other entity or business
23    association, including all wholly owned subsidiaries,

 

 

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1    majority-owned subsidiaries, parent companies, or
2    affiliates of those entities or business associations,
3    that exist for the purpose of making profit.
4        "Contract to shelter migrant children" means entering
5    into a contract with the federal government to shelter
6    migrant children under the federal Unaccompanied Alien
7    Children Program or a substantially similar federal
8    program.
9        "Illinois Investment Policy Board" means the board
10    established under subsection (b) of this Section.
11        "Direct holdings" in a company means all publicly
12    traded securities of that company that are held directly by
13    the retirement system in an actively managed account or
14    fund in which the retirement system owns all shares or
15    interests.
16        "Expatriated entity" has the meaning ascribed to it in
17    Section 1-15.120 of the Illinois Procurement Code.
18        "Indirect holdings" in a company means all securities
19    of that company that are held in an account or fund, such
20    as a mutual fund, managed by one or more persons not
21    employed by the retirement system, in which the retirement
22    system owns shares or interests together with other
23    investors not subject to the provisions of this Section or
24    that are held in an index fund.
25        "Iran-restricted company" means a company that meets
26    the qualifications under Section 1-110.15 of this Code.

 

 

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1        "Private market fund" means any private equity fund,
2    private equity funds of funds, venture capital fund, hedge
3    fund, hedge fund of funds, real estate fund, or other
4    investment vehicle that is not publicly traded.
5        "Restricted companies" means companies that boycott
6    Israel, for-profit companies that contract to shelter
7    migrant children, Iran-restricted companies,
8    Sudan-restricted companies, and expatriated entities.
9        "Retirement system" means a retirement system
10    established under Article 2, 14, 15, 16, or 18 of this Code
11    or the Illinois State Board of Investment.
12        "Sudan-restricted company" means a company that meets
13    the qualifications under Section 1-110.6 of this Code.
14    (b) There shall be established an Illinois Investment
15Policy Board. The Illinois Investment Policy Board shall
16consist of 7 members. Each board of a pension fund or
17investment board created under Article 15, 16, or 22A of this
18Code shall appoint one member, and the Governor shall appoint 4
19members.
20    (c) Notwithstanding any provision of law to the contrary,
21beginning January 1, 2016, Sections 110.15 and 1-110.6 of this
22Code shall be administered in accordance with this Section.
23    (d) By April 1, 2016, the Illinois Investment Policy Board
24shall make its best efforts to identify all Iran-restricted
25companies, Sudan-restricted companies, and companies that
26boycott Israel and assemble those identified companies into a

 

 

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1list of restricted companies, to be distributed to each
2retirement system.
3    These efforts shall include the following, as appropriate
4in the Illinois Investment Policy Board's judgment:
5        (1) reviewing and relying on publicly available
6    information regarding Iran-restricted companies,
7    Sudan-restricted companies, and companies that boycott
8    Israel, including information provided by nonprofit
9    organizations, research firms, and government entities;
10        (2) contacting asset managers contracted by the
11    retirement systems that invest in Iran-restricted
12    companies, Sudan-restricted companies, and companies that
13    boycott Israel;
14        (3) contacting other institutional investors that have
15    divested from or engaged with Iran-restricted companies,
16    Sudan-restricted companies, and companies that boycott
17    Israel; and
18        (4) retaining an independent research firm to identify
19    Iran-restricted companies, Sudan-restricted companies, and
20    companies that boycott Israel.
21    The Illinois Investment Policy Board shall review the list
22of restricted companies on a quarterly basis based on evolving
23information from, among other sources, those listed in this
24subsection (d) and distribute any updates to the list of
25restricted companies to the retirement systems and the State
26Treasurer.

 

 

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1    By April 1, 2018, the Illinois Investment Policy Board
2shall make its best efforts to identify all expatriated
3entities and include those companies in the list of restricted
4companies distributed to each retirement system and the State
5Treasurer. These efforts shall include the following, as
6appropriate in the Illinois Investment Policy Board's
7judgment:
8        (1) reviewing and relying on publicly available
9    information regarding expatriated entities, including
10    information provided by nonprofit organizations, research
11    firms, and government entities;
12        (2) contacting asset managers contracted by the
13    retirement systems that invest in expatriated entities;
14        (3) contacting other institutional investors that have
15    divested from or engaged with expatriated entities; and
16        (4) retaining an independent research firm to identify
17    expatriated entities.
18    By July 1, 2020, the Illinois Investment Policy Board shall
19make its best efforts to identify all for-profit companies that
20contract to shelter migrant children and include those
21companies in the list of restricted companies distributed to
22each retirement system. These efforts shall include the
23following, as appropriate in the Illinois Investment Policy
24Board's judgment:
25        (1) reviewing and relying on publicly available
26    information regarding for-profit companies that contract

 

 

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1    to shelter migrant children, including information
2    provided by nonprofit organizations, research firms, and
3    government entities;
4        (2) contacting asset managers contracted by the
5    retirement systems that invest in for-profit companies
6    that contract to shelter migrant children;
7        (3) contacting other institutional investors that have
8    divested from or engaged with for-profit companies that
9    contract to shelter migrant children; and
10        (4) retaining an independent research firm to identify
11    for-profit companies that contract to shelter migrant
12    children.
13    (e) The Illinois Investment Policy Board shall adhere to
14the following procedures for companies on the list of
15restricted companies:
16        (1) For each company newly identified in subsection
17    (d), the Illinois Investment Policy Board shall send a
18    written notice informing the company of its status and that
19    it may become subject to divestment or shareholder activism
20    by the retirement systems.
21        (2) If, following the Illinois Investment Policy
22    Board's engagement pursuant to this subsection (e) with a
23    restricted company, that company ceases activity that
24    designates the company to be an Iran-restricted company, a
25    Sudan-restricted company, a company that boycotts Israel,
26    or an expatriated entity, the company shall be removed from

 

 

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1    the list of restricted companies and the provisions of this
2    Section shall cease to apply to it unless it resumes such
3    activities.
4    (f) Except as provided in subsection (f-1) of this Section
5the retirement system shall adhere to the following procedures
6for companies on the list of restricted companies:
7        (1) The retirement system shall identify those
8    companies on the list of restricted companies in which the
9    retirement system owns direct holdings and indirect
10    holdings.
11        (2) The retirement system shall instruct its
12    investment advisors to sell, redeem, divest, or withdraw
13    all direct holdings of restricted companies from the
14    retirement system's assets under management in an orderly
15    and fiduciarily responsible manner within 12 months after
16    the company's most recent appearance on the list of
17    restricted companies.
18        (3) The retirement system may not acquire securities of
19    restricted companies.
20        (4) The provisions of this subsection (f) do not apply
21    to the retirement system's indirect holdings or private
22    market funds. The Illinois Investment Policy Board shall
23    submit letters to the managers of those investment funds
24    containing restricted companies requesting that they
25    consider removing the companies from the fund or create a
26    similar actively managed fund having indirect holdings

 

 

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1    devoid of the companies. If the manager creates a similar
2    fund, the retirement system shall replace all applicable
3    investments with investments in the similar fund in an
4    expedited timeframe consistent with prudent investing
5    standards.
6    (f-1) The retirement system shall adhere to the following
7procedures for restricted companies that are expatriated
8entities:
9        (1) To the extent that the retirement system believes
10    that shareholder activism would be more impactful than
11    divestment, the retirement system shall have the authority
12    to engage with a restricted company prior to divesting.
13        (2) Subject to any applicable State or Federal laws,
14    methods of shareholder activism utilized by the retirement
15    system may include, but are not limited to, bringing
16    shareholder resolutions and proxy voting on shareholder
17    resolutions.
18        (3) The retirement system shall report on its
19    shareholder activism and the outcome of such efforts to the
20    Illinois Investment Policy Board by April 1 of each year.
21        (4) If the engagement efforts of the retirement system
22    are unsuccessful, then it shall adhere to the procedures
23    under subsection (f) of this Section.
24    (g) Upon request, and by April 1 of each year, each
25retirement system shall provide the Illinois Investment Policy
26Board with information regarding investments sold, redeemed,

 

 

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1divested, or withdrawn in compliance with this Section.
2    (h) Notwithstanding any provision of this Section to the
3contrary, a retirement system may cease divesting from
4companies pursuant to subsection (f) if clear and convincing
5evidence shows that the value of investments in such companies
6becomes equal to or less than 0.5% of the market value of all
7assets under management by the retirement system. For any
8cessation of divestment authorized by this subsection (h), the
9retirement system shall provide a written notice to the
10Illinois Investment Policy Board in advance of the cessation of
11divestment, setting forth the reasons and justification,
12supported by clear and convincing evidence, for its decision to
13cease divestment under subsection (f).
14    (i) The cost associated with the activities of the Illinois
15Investment Policy Board shall be borne by the boards of each
16pension fund or investment board created under Article 15, 16,
17or 22A of this Code.
18    (j) With respect to actions taken in compliance with this
19Section, including all good-faith determinations regarding
20companies as required by this Section, the retirement system
21and Illinois Investment Policy Board are exempt from any
22conflicting statutory or common law obligations, including any
23fiduciary duties under this Article and any obligations with
24respect to choice of asset managers, investment funds, or
25investments for the retirement system's securities portfolios.
26    (k) It is not the intent of the General Assembly in

 

 

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1enacting this amendatory Act of the 99th General Assembly to
2cause divestiture from any company based in the United States
3of America. The Illinois Investment Policy Board shall consider
4this intent when developing or reviewing the list of restricted
5companies.
6    (l) If any provision of this amendatory Act of the 99th
7General Assembly or its application to any person or
8circumstance is held invalid, the invalidity of that provision
9or application does not affect other provisions or applications
10of this amendatory Act of the 99th General Assembly that can be
11given effect without the invalid provision or application.
12    (m) If any provision of Public Act 100-551 this amendatory
13Act of the 100th General Assembly or its application to any
14person or circumstance is held invalid, the invalidity of that
15provision or application does not affect other provisions or
16applications of Public Act 100-551 this amendatory Act of the
17100th General Assembly that can be given effect without the
18invalid provision or application.
19    If any provision of this amendatory Act of the 101st
20General Assembly or its application to any person or
21circumstance is held invalid, the invalidity of that provision
22or application does not affect other provisions or applications
23of this amendatory Act of the 101st General Assembly that can
24be given effect without the invalid provision or application.
25(Source: P.A. 99-128, eff. 7-23-15; 100-551, eff. 1-1-18.)
 
26    Section 99. Effective date. This Act takes effect upon

 

 

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1becoming law.