Rep. Elizabeth Hernandez
Filed: 4/15/2021
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1 | AMENDMENT TO HOUSE BILL 232
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2 | AMENDMENT NO. ______. Amend House Bill 232 by replacing | ||||||
3 | everything after the enacting clause with the following:
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4 | "Section 5. The Illinois Pension Code is amended by | ||||||
5 | changing Section 1-110.16 and by adding Section 1-110.17 as | ||||||
6 | follows: | ||||||
7 | (40 ILCS 5/1-110.16) | ||||||
8 | Sec. 1-110.16. Transactions prohibited by retirement | ||||||
9 | systems; companies that boycott Israel, for-profit companies | ||||||
10 | that contract to shelter migrant children, Iran-restricted | ||||||
11 | companies, Sudan-restricted companies, and expatriated | ||||||
12 | entities. | ||||||
13 | (a) As used in this Section: | ||||||
14 | "Boycott Israel" means engaging in actions that are | ||||||
15 | politically motivated and are intended to penalize, | ||||||
16 | inflict economic harm on, or otherwise limit commercial |
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1 | relations with the State of Israel or companies based in | ||||||
2 | the State of Israel or in territories controlled by the | ||||||
3 | State of Israel. | ||||||
4 | "Company" means any sole proprietorship, organization, | ||||||
5 | association, corporation, partnership, joint venture, | ||||||
6 | limited partnership, limited liability partnership, | ||||||
7 | limited liability company, or other entity or business | ||||||
8 | association, including all wholly owned subsidiaries, | ||||||
9 | majority-owned subsidiaries, parent companies, or | ||||||
10 | affiliates of those entities or business associations, | ||||||
11 | that exist for the purpose of making profit. | ||||||
12 | "Contract to shelter migrant children" means entering | ||||||
13 | into a contract with the federal government to shelter | ||||||
14 | migrant children under the federal Unaccompanied Alien | ||||||
15 | Children Program or a substantially similar federal | ||||||
16 | program. | ||||||
17 | "Illinois Investment Policy Board" means the board | ||||||
18 | established under subsection (b) of this Section. | ||||||
19 | "Direct holdings" in a company means all publicly | ||||||
20 | traded securities of that company that are held directly | ||||||
21 | by the retirement system in an actively managed account or | ||||||
22 | fund in which the retirement system owns all shares or | ||||||
23 | interests. | ||||||
24 | "Expatriated entity" has the meaning ascribed to it in | ||||||
25 | Section 1-15.120 of the Illinois Procurement Code. | ||||||
26 | "Indirect holdings" in a company means all securities |
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1 | of that company that are held in an account or fund, such | ||||||
2 | as a mutual fund, managed by one or more persons not | ||||||
3 | employed by the retirement system, in which the retirement | ||||||
4 | system owns shares or interests together with other | ||||||
5 | investors not subject to the provisions of this Section or | ||||||
6 | that are held in an index fund. | ||||||
7 | "Iran-restricted company" means a company that meets | ||||||
8 | the qualifications under Section 1-110.15 of this Code. | ||||||
9 | "Private market fund" means any private equity fund, | ||||||
10 | private equity funds of funds, venture capital fund, hedge | ||||||
11 | fund, hedge fund of funds, real estate fund, or other | ||||||
12 | investment vehicle that is not publicly traded. | ||||||
13 | "Restricted companies" means companies that boycott | ||||||
14 | Israel, for-profit companies that contract to shelter | ||||||
15 | migrant children, Iran-restricted companies, | ||||||
16 | Sudan-restricted companies, and expatriated entities. | ||||||
17 | "Retirement system" means a retirement system | ||||||
18 | established under Article 2, 14, 15, 16, or 18 of this Code | ||||||
19 | or the Illinois State Board of Investment. | ||||||
20 | "Sudan-restricted company" means a company that meets | ||||||
21 | the qualifications under Section 1-110.6 of this Code. | ||||||
22 | (b) There shall be established an Illinois Investment | ||||||
23 | Policy Board. The Illinois Investment Policy Board shall | ||||||
24 | consist of 7 members. Each board of a pension fund or | ||||||
25 | investment board created under Article 15, 16, or 22A of this | ||||||
26 | Code shall appoint one member, and the Governor shall appoint |
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1 | 4 members. | ||||||
2 | (c) Notwithstanding any provision of law to the contrary, | ||||||
3 | beginning January 1, 2016, Sections 110.15 and 1-110.6 of this | ||||||
4 | Code shall be administered in accordance with this Section. | ||||||
5 | (d) By April 1, 2016, the Illinois Investment Policy Board | ||||||
6 | shall make its best efforts to identify all Iran-restricted | ||||||
7 | companies, Sudan-restricted companies, and companies that | ||||||
8 | boycott Israel and assemble those identified companies into a | ||||||
9 | list of restricted companies, to be distributed to each | ||||||
10 | retirement system. | ||||||
11 | These efforts shall include the following, as appropriate | ||||||
12 | in the Illinois Investment Policy Board's judgment: | ||||||
13 | (1) reviewing and relying on publicly available | ||||||
14 | information regarding Iran-restricted companies, | ||||||
15 | Sudan-restricted companies, and companies that boycott | ||||||
16 | Israel, including information provided by nonprofit | ||||||
17 | organizations, research firms, and government entities; | ||||||
18 | (2) contacting asset managers contracted by the | ||||||
19 | retirement systems that invest in Iran-restricted | ||||||
20 | companies, Sudan-restricted companies, and companies that | ||||||
21 | boycott Israel; | ||||||
22 | (3) contacting other institutional investors that have | ||||||
23 | divested from or engaged with Iran-restricted companies, | ||||||
24 | Sudan-restricted companies, and companies that boycott | ||||||
25 | Israel; and | ||||||
26 | (4) retaining an independent research firm to identify |
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1 | Iran-restricted companies, Sudan-restricted companies, | ||||||
2 | and companies that boycott Israel. | ||||||
3 | The Illinois Investment Policy Board shall review the list | ||||||
4 | of restricted companies on a quarterly basis based on evolving | ||||||
5 | information from, among other sources, those listed in this | ||||||
6 | subsection (d) and distribute any updates to the list of | ||||||
7 | restricted companies to the retirement systems and the State | ||||||
8 | Treasurer. | ||||||
9 | By April 1, 2018, the Illinois Investment Policy Board | ||||||
10 | shall make its best efforts to identify all expatriated | ||||||
11 | entities and include those companies in the list of restricted | ||||||
12 | companies distributed to each retirement system and the State | ||||||
13 | Treasurer. These efforts shall include the following, as | ||||||
14 | appropriate in the Illinois Investment Policy Board's | ||||||
15 | judgment: | ||||||
16 | (1) reviewing and relying on publicly available | ||||||
17 | information regarding expatriated entities, including | ||||||
18 | information provided by nonprofit organizations, research | ||||||
19 | firms, and government entities; | ||||||
20 | (2) contacting asset managers contracted by the | ||||||
21 | retirement systems that invest in expatriated entities; | ||||||
22 | (3) contacting other institutional investors that have | ||||||
23 | divested from or engaged with expatriated entities; and | ||||||
24 | (4) retaining an independent research firm to identify | ||||||
25 | expatriated entities. | ||||||
26 | By July 1, 2022, the Illinois Investment Policy Board |
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1 | shall make its best efforts to identify all for-profit | ||||||
2 | companies that contract to shelter migrant children and | ||||||
3 | include those companies in the list of restricted companies | ||||||
4 | distributed to each retirement system. These efforts shall | ||||||
5 | include the following, as appropriate in the Illinois | ||||||
6 | Investment Policy Board's judgment: | ||||||
7 | (1) reviewing and relying on publicly available | ||||||
8 | information regarding for-profit companies that contract | ||||||
9 | to shelter migrant children, including information | ||||||
10 | provided by nonprofit organizations, research firms, and | ||||||
11 | government entities; | ||||||
12 | (2) contacting asset managers contracted by the | ||||||
13 | retirement systems that invest in for-profit companies | ||||||
14 | that contract to shelter migrant children; | ||||||
15 | (3) contacting other institutional investors that have | ||||||
16 | divested from or engaged with for-profit companies that | ||||||
17 | contract to shelter migrant children; and | ||||||
18 | (4) retaining an independent research firm to identify | ||||||
19 | for-profit companies that contract to shelter migrant | ||||||
20 | children. | ||||||
21 | (e) The Illinois Investment Policy Board shall adhere to | ||||||
22 | the following procedures for companies on the list of | ||||||
23 | restricted companies: | ||||||
24 | (1) For each company newly identified in subsection | ||||||
25 | (d), the Illinois Investment Policy Board shall send a | ||||||
26 | written notice informing the company of its status and |
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1 | that it may become subject to divestment or shareholder | ||||||
2 | activism by the retirement systems. | ||||||
3 | (2) If, following the Illinois Investment Policy | ||||||
4 | Board's engagement pursuant to this subsection (e) with a | ||||||
5 | restricted company, that company ceases activity that | ||||||
6 | designates the company to be an Iran-restricted company, a | ||||||
7 | Sudan-restricted company, a company that boycotts Israel, | ||||||
8 | or an expatriated entity, or a for-profit company that | ||||||
9 | contracts to shelter migrant children, the company shall | ||||||
10 | be removed from the list of restricted companies and the | ||||||
11 | provisions of this Section shall cease to apply to it | ||||||
12 | unless it resumes such activities. | ||||||
13 | (f) Except as provided in subsection (f-1) of this Section | ||||||
14 | the retirement system shall adhere to the following procedures | ||||||
15 | for companies on the list of restricted companies: | ||||||
16 | (1) The retirement system shall identify those | ||||||
17 | companies on the list of restricted companies in which the | ||||||
18 | retirement system owns direct holdings and indirect | ||||||
19 | holdings. | ||||||
20 | (2) The retirement system shall instruct its | ||||||
21 | investment advisors to sell, redeem, divest, or withdraw | ||||||
22 | all direct holdings of restricted companies from the | ||||||
23 | retirement system's assets under management in an orderly | ||||||
24 | and fiduciarily responsible manner within 12 months after | ||||||
25 | the company's most recent appearance on the list of | ||||||
26 | restricted companies. |
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1 | (3) The retirement system may not acquire securities | ||||||
2 | of restricted companies. | ||||||
3 | (4) The provisions of this subsection (f) do not apply | ||||||
4 | to the retirement system's indirect holdings or private | ||||||
5 | market funds. The Illinois Investment Policy Board shall | ||||||
6 | submit letters to the managers of those investment funds | ||||||
7 | containing restricted companies requesting that they | ||||||
8 | consider removing the companies from the fund or create a | ||||||
9 | similar actively managed fund having indirect holdings | ||||||
10 | devoid of the companies. If the manager creates a similar | ||||||
11 | fund, the retirement system shall replace all applicable | ||||||
12 | investments with investments in the similar fund in an | ||||||
13 | expedited timeframe consistent with prudent investing | ||||||
14 | standards. | ||||||
15 | (f-1) The retirement system shall adhere to the following | ||||||
16 | procedures for restricted companies that are expatriated | ||||||
17 | entities or for-profit companies that contract to shelter | ||||||
18 | migrant children : | ||||||
19 | (1) To the extent that the retirement system believes | ||||||
20 | that shareholder activism would be more impactful than | ||||||
21 | divestment, the retirement system shall have the authority | ||||||
22 | to engage with a restricted company prior to divesting. | ||||||
23 | (2) Subject to any applicable State or Federal laws, | ||||||
24 | methods of shareholder activism utilized by the retirement | ||||||
25 | system may include, but are not limited to, bringing | ||||||
26 | shareholder resolutions and proxy voting on shareholder |
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1 | resolutions. | ||||||
2 | (3) The retirement system shall report on its | ||||||
3 | shareholder activism and the outcome of such efforts to | ||||||
4 | the Illinois Investment Policy Board by April 1 of each | ||||||
5 | year. | ||||||
6 | (4) If the engagement efforts of the retirement system | ||||||
7 | are unsuccessful, then it shall adhere to the procedures | ||||||
8 | under subsection (f) of this Section. | ||||||
9 | (g) Upon request, and by April 1 of each year, each | ||||||
10 | retirement system shall provide the Illinois Investment Policy | ||||||
11 | Board with information regarding investments sold, redeemed, | ||||||
12 | divested, or withdrawn in compliance with this Section. | ||||||
13 | (h) Notwithstanding any provision of this Section to the | ||||||
14 | contrary, a retirement system may cease divesting from | ||||||
15 | companies pursuant to subsection (f) if clear and convincing | ||||||
16 | evidence shows that the value of investments in such companies | ||||||
17 | becomes equal to or less than 0.5% of the market value of all | ||||||
18 | assets under management by the retirement system. For any | ||||||
19 | cessation of divestment authorized by this subsection (h), the | ||||||
20 | retirement system shall provide a written notice to the | ||||||
21 | Illinois Investment Policy Board in advance of the cessation | ||||||
22 | of divestment, setting forth the reasons and justification, | ||||||
23 | supported by clear and convincing evidence, for its decision | ||||||
24 | to cease divestment under subsection (f). | ||||||
25 | (i) The cost associated with the activities of the | ||||||
26 | Illinois Investment Policy Board shall be borne by the boards |
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1 | of each pension fund or investment board created under Article | ||||||
2 | 15, 16, or 22A of this Code. | ||||||
3 | (j) With respect to actions taken in compliance with this | ||||||
4 | Section, including all good-faith determinations regarding | ||||||
5 | companies as required by this Section, the retirement system | ||||||
6 | and Illinois Investment Policy Board are exempt from any | ||||||
7 | conflicting statutory or common law obligations, including any | ||||||
8 | fiduciary duties under this Article and any obligations with | ||||||
9 | respect to choice of asset managers, investment funds, or | ||||||
10 | investments for the retirement system's securities portfolios. | ||||||
11 | (k) It is not the intent of the General Assembly in | ||||||
12 | enacting this amendatory Act of the 99th General Assembly to | ||||||
13 | cause divestiture from any company based in the United States | ||||||
14 | of America. The Illinois Investment Policy Board shall | ||||||
15 | consider this intent when developing or reviewing the list of | ||||||
16 | restricted companies. | ||||||
17 | (l) If any provision of this amendatory Act of the 99th | ||||||
18 | General Assembly or its application to any person or | ||||||
19 | circumstance is held invalid, the invalidity of that provision | ||||||
20 | or application does not affect other provisions or | ||||||
21 | applications of this amendatory Act of the 99th General | ||||||
22 | Assembly that can be given effect without the invalid | ||||||
23 | provision or application.
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24 | (m) If any provision of Public Act 100-551 this amendatory | ||||||
25 | Act of the 100th General Assembly or its application to any | ||||||
26 | person or circumstance is held invalid, the invalidity of that |
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1 | provision or application does not affect other provisions or | ||||||
2 | applications of Public Act 100-551 this amendatory Act of the | ||||||
3 | 100th General Assembly that can be given effect without the | ||||||
4 | invalid provision or application. | ||||||
5 | If any provision of this amendatory Act of the 102nd | ||||||
6 | General Assembly or its application to any person or | ||||||
7 | circumstance is held invalid, the invalidity of that provision | ||||||
8 | or application does not affect other provisions or | ||||||
9 | applications of this amendatory Act of the 102nd General | ||||||
10 | Assembly that can be given effect without the invalid | ||||||
11 | provision or application. | ||||||
12 | (Source: P.A. 99-128, eff. 7-23-15; 100-551, eff. 1-1-18 .) | ||||||
13 | (40 ILCS 5/1-110.17 new) | ||||||
14 | Sec. 1-110.17. Expiration of prohibited transactions. If, | ||||||
15 | at least 4 years after the effective date of an amendatory Act | ||||||
16 | that initially establishes a prohibited transaction under this | ||||||
17 | Article, the Illinois Investment Policy Board concludes that | ||||||
18 | divestment is no longer necessary due to achievement of the | ||||||
19 | underlying goals of the amendatory Act establishing the | ||||||
20 | prohibited transaction, changes in status surrounding the | ||||||
21 | prohibited transactions, or other verifiable reasons, the | ||||||
22 | Illinois Investment Policy Board may cease actions to require | ||||||
23 | divestment, identify restricted companies, or prohibit | ||||||
24 | transactions by a majority vote of the Illinois Investment | ||||||
25 | Policy Board if: (1) no less than one year prior to the change |
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1 | in policy, the Illinois Investment Policy Board notifies, in | ||||||
2 | writing, the General Assembly of the change in policy and | ||||||
3 | lists the reasons for changing the policy; and (2) the General | ||||||
4 | Assembly does not, before the change in policy, adopt a House | ||||||
5 | Resolution or a Senate Resolution instructing the Illinois | ||||||
6 | Investment Policy Board to not change the policy.
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7 | Section 99. Effective date. This Act takes effect upon | ||||||
8 | becoming law.".
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