Illinois General Assembly - Full Text of HB5705
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Full Text of HB5705  102nd General Assembly

HB5705 102ND GENERAL ASSEMBLY

  
  

 


 
102ND GENERAL ASSEMBLY
State of Illinois
2021 and 2022
HB5705

 

Introduced 2/24/2022, by Rep. Jim Durkin - Dan Brady

 

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 companies domiciled in Russia 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. Makes conforming changes. Effective immediately.


LRB102 26465 RPS 36916 b

 

 

A BILL FOR

 

HB5705LRB102 26465 RPS 36916 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
5changing Section 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, and companies domiciled in Russia.
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
13    by 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.

 

 

HB5705- 3 -LRB102 26465 RPS 36916 b

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, and
9    companies domiciled in Russia.
10        "Retirement system" means a retirement system
11    established under Article 2, 14, 15, 16, or 18 of this Code
12    or the Illinois State Board of Investment.
13        "Sudan-restricted company" means a company that meets
14    the qualifications under Section 1-110.6 of this Code.
15    (b) There shall be established an Illinois Investment
16Policy Board. The Illinois Investment Policy Board shall
17consist of 7 members. Each board of a pension fund or
18investment board created under Article 15, 16, or 22A of this
19Code shall appoint one member, and the Governor shall appoint
204 members.
21    (c) Notwithstanding any provision of law to the contrary,
22beginning January 1, 2016, Sections 110.15 and 1-110.6 of this
23Code shall be administered in accordance with this Section.
24    (d) By April 1, 2016, the Illinois Investment Policy Board
25shall make its best efforts to identify all Iran-restricted
26companies, Sudan-restricted companies, and companies that

 

 

HB5705- 4 -LRB102 26465 RPS 36916 b

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

 

 

HB5705- 5 -LRB102 26465 RPS 36916 b

1Treasurer.
2    By April 1, 2018, the Illinois Investment Policy Board
3shall make its best efforts to identify all expatriated
4entities and include those companies in the list of restricted
5companies distributed to each retirement system and the State
6Treasurer. These efforts shall include the following, as
7appropriate in the Illinois Investment Policy Board's
8judgment:
9        (1) reviewing and relying on publicly available
10    information regarding expatriated entities, including
11    information provided by nonprofit organizations, research
12    firms, and government entities;
13        (2) contacting asset managers contracted by the
14    retirement systems that invest in expatriated entities;
15        (3) contacting other institutional investors that have
16    divested from or engaged with expatriated entities; and
17        (4) retaining an independent research firm to identify
18    expatriated entities.
19    By July 1, 2022, the Illinois Investment Policy Board
20shall make its best efforts to identify all for-profit
21companies that contract to shelter migrant children and
22include those companies in the list of restricted companies
23distributed to each retirement system. These efforts shall
24include the following, as appropriate in the Illinois
25Investment Policy Board's judgment:
26        (1) reviewing and relying on publicly available

 

 

HB5705- 6 -LRB102 26465 RPS 36916 b

1    information regarding for-profit companies that contract
2    to shelter migrant children, including information
3    provided by nonprofit organizations, research firms, and
4    government entities;
5        (2) contacting asset managers contracted by the
6    retirement systems that invest in for-profit companies
7    that contract to shelter migrant children;
8        (3) contacting other institutional investors that have
9    divested from or engaged with for-profit companies that
10    contract to shelter migrant children; and
11        (4) retaining an independent research firm to identify
12    for-profit companies that contract to shelter migrant
13    children.
14    No later than 6 months after the effective date of this
15amendatory Act of the 102nd General Assembly, the Illinois
16Investment Policy Board shall make its best efforts to
17identify all companies domiciled in Russia and include those
18companies in the list of restricted companies distributed to
19each retirement system. These efforts shall include the
20following, as appropriate in the Illinois Investment Policy
21Board's judgment:
22        (1) reviewing and relying on publicly available
23    information regarding companies domiciled in Russia,
24    including information provided by nonprofit organizations,
25    research firms, and government entities;
26        (2) contacting asset managers contracted by the

 

 

HB5705- 7 -LRB102 26465 RPS 36916 b

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

 

 

HB5705- 8 -LRB102 26465 RPS 36916 b

1    the Illinois Investment Policy Board's engagement pursuant
2    to this subsection (e), that company is no longer
3    domiciled in Russia, the company shall be removed from the
4    list of restricted companies and the provisions of this
5    Section shall cease to apply to it unless it becomes
6    domiciled in Russia.
7    (f) Except as provided in subsection (f-1) of this Section
8the retirement system shall adhere to the following procedures
9for companies on the list of restricted companies:
10        (1) The retirement system shall identify those
11    companies on the list of restricted companies in which the
12    retirement system owns direct holdings and indirect
13    holdings.
14        (2) The retirement system shall instruct its
15    investment advisors to sell, redeem, divest, or withdraw
16    all direct holdings of restricted companies from the
17    retirement system's assets under management in an orderly
18    and fiduciarily responsible manner within 12 months after
19    the company's most recent appearance on the list of
20    restricted companies.
21        (3) The retirement system may not acquire securities
22    of restricted companies.
23        (4) The provisions of this subsection (f) do not apply
24    to the retirement system's indirect holdings or private
25    market funds. The Illinois Investment Policy Board shall
26    submit letters to the managers of those investment funds

 

 

HB5705- 9 -LRB102 26465 RPS 36916 b

1    containing restricted companies requesting that they
2    consider removing the companies from the fund or create a
3    similar actively managed fund having indirect holdings
4    devoid of the companies. If the manager creates a similar
5    fund, the retirement system shall replace all applicable
6    investments with investments in the similar fund in an
7    expedited timeframe consistent with prudent investing
8    standards.
9    (f-1) The retirement system shall adhere to the following
10procedures for restricted companies that are expatriated
11entities or for-profit companies that contract to shelter
12migrant children:
13        (1) To the extent that the retirement system believes
14    that shareholder activism would be more impactful than
15    divestment, the retirement system shall have the authority
16    to engage with a restricted company prior to divesting.
17        (2) Subject to any applicable State or Federal laws,
18    methods of shareholder activism utilized by the retirement
19    system may include, but are not limited to, bringing
20    shareholder resolutions and proxy voting on shareholder
21    resolutions.
22        (3) The retirement system shall report on its
23    shareholder activism and the outcome of such efforts to
24    the Illinois Investment Policy Board by April 1 of each
25    year.
26        (4) If the engagement efforts of the retirement system

 

 

HB5705- 10 -LRB102 26465 RPS 36916 b

1    are unsuccessful, then it shall adhere to the procedures
2    under subsection (f) of this Section.
3    (g) Upon request, and by April 1 of each year, each
4retirement system shall provide the Illinois Investment Policy
5Board with information regarding investments sold, redeemed,
6divested, or withdrawn in compliance with this Section.
7    (h) Notwithstanding any provision of this Section to the
8contrary, a retirement system may cease divesting from
9companies pursuant to subsection (f) if clear and convincing
10evidence shows that the value of investments in such companies
11becomes equal to or less than 0.5% of the market value of all
12assets under management by the retirement system. For any
13cessation of divestment authorized by this subsection (h), the
14retirement system shall provide a written notice to the
15Illinois Investment Policy Board in advance of the cessation
16of divestment, setting forth the reasons and justification,
17supported by clear and convincing evidence, for its decision
18to cease divestment under subsection (f).
19    (i) The cost associated with the activities of the
20Illinois Investment Policy Board shall be borne by the boards
21of each pension fund or investment board created under Article
2215, 16, or 22A of this Code.
23    (j) With respect to actions taken in compliance with this
24Section, including all good-faith determinations regarding
25companies as required by this Section, the retirement system
26and Illinois Investment Policy Board are exempt from any

 

 

HB5705- 11 -LRB102 26465 RPS 36916 b

1conflicting statutory or common law obligations, including any
2fiduciary duties under this Article and any obligations with
3respect to choice of asset managers, investment funds, or
4investments for the retirement system's securities portfolios.
5    (k) It is not the intent of the General Assembly in
6enacting this amendatory Act of the 99th General Assembly to
7cause divestiture from any company based in the United States
8of America. The Illinois Investment Policy Board shall
9consider this intent when developing or reviewing the list of
10restricted companies.
11    (l) If any provision of this amendatory Act of the 99th
12General Assembly or its application to any person or
13circumstance is held invalid, the invalidity of that provision
14or application does not affect other provisions or
15applications of this amendatory Act of the 99th General
16Assembly that can be given effect without the invalid
17provision or application.
18    If any provision of Public Act 100-551 or its application
19to any person or circumstance is held invalid, the invalidity
20of that provision or application does not affect other
21provisions or applications of Public Act 100-551 that can be
22given effect without the invalid provision or application.
23    If any provision of Public Act 102-118 this amendatory Act
24of the 102nd General Assembly or its application to any person
25or circumstance is held invalid, the invalidity of that
26provision or application does not affect other provisions or

 

 

HB5705- 12 -LRB102 26465 RPS 36916 b

1applications of Public Act 102-118 this amendatory Act of the
2102nd General Assembly that can be given effect without the
3invalid provision or application.
4    If any provision of this amendatory Act of the 102nd
5General Assembly or its application to any person or
6circumstance is held invalid, the invalidity of that provision
7or application does not affect other provisions or
8applications of this amendatory Act of the 102nd General
9Assembly that can be given effect without the invalid
10provision or application.
11(Source: P.A. 102-118, eff. 7-23-21.)
 
12    Section 99. Effective date. This Act takes effect upon
13becoming law.