101ST GENERAL ASSEMBLY
State of Illinois
2019 and 2020
HB0280

 

Introduced , by Rep. Will Guzzardi

 

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 that contract to build a border wall 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 04977 RPS 49986 b

FISCAL NOTE ACT MAY APPLY
PENSION IMPACT NOTE ACT MAY APPLY

 

 

A BILL FOR

 

HB0280LRB101 04977 RPS 49986 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, companies that
9contract to build a border wall, Iran-restricted companies,
10Sudan-restricted companies, and expatriated entities.
11    (a) As used in this Section:
12        "Boycott Israel" means engaging in actions that are
13    politically motivated and are intended to penalize,
14    inflict economic harm on, or otherwise limit commercial
15    relations with the State of Israel or companies based in
16    the State of Israel or in territories controlled by the
17    State of Israel.
18        "Company" means any sole proprietorship, organization,
19    association, corporation, partnership, joint venture,
20    limited partnership, limited liability partnership,
21    limited liability company, or other entity or business
22    association, including all wholly owned subsidiaries,
23    majority-owned subsidiaries, parent companies, or

 

 

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1    affiliates of those entities or business associations,
2    that exist for the purpose of making profit.
3        "Contract to build a border wall" means entering into a
4    contract with the federal government for construction
5    pursuant to Section 4 of Executive Order 13767 of the
6    President of the United States.
7        "Illinois Investment Policy Board" means the board
8    established under subsection (b) of this Section.
9        "Direct holdings" in a company means all publicly
10    traded securities of that company that are held directly by
11    the retirement system in an actively managed account or
12    fund in which the retirement system owns all shares or
13    interests.
14        "Expatriated entity" has the meaning ascribed to it in
15    Section 1-15.120 of the Illinois Procurement Code.
16        "Indirect holdings" in a company means all securities
17    of that company that are held in an account or fund, such
18    as a mutual fund, managed by one or more persons not
19    employed by the retirement system, in which the retirement
20    system owns shares or interests together with other
21    investors not subject to the provisions of this Section or
22    that are held in an index fund.
23        "Iran-restricted company" means a company that meets
24    the qualifications under Section 1-110.15 of this Code.
25        "Private market fund" means any private equity fund,
26    private equity funds of funds, venture capital fund, hedge

 

 

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

 

 

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1    These efforts shall include the following, as appropriate
2in the Illinois Investment Policy Board's judgment:
3        (1) reviewing and relying on publicly available
4    information regarding Iran-restricted companies,
5    Sudan-restricted companies, and companies that boycott
6    Israel, including information provided by nonprofit
7    organizations, research firms, and government entities;
8        (2) contacting asset managers contracted by the
9    retirement systems that invest in Iran-restricted
10    companies, Sudan-restricted companies, and companies that
11    boycott Israel;
12        (3) contacting other institutional investors that have
13    divested from or engaged with Iran-restricted companies,
14    Sudan-restricted companies, and companies that boycott
15    Israel; and
16        (4) retaining an independent research firm to identify
17    Iran-restricted companies, Sudan-restricted companies, and
18    companies that boycott Israel.
19    The Illinois Investment Policy Board shall review the list
20of restricted companies on a quarterly basis based on evolving
21information from, among other sources, those listed in this
22subsection (d) and distribute any updates to the list of
23restricted companies to the retirement systems and the State
24Treasurer.
25    By April 1, 2018, the Illinois Investment Policy Board
26shall make its best efforts to identify all expatriated

 

 

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1entities and include those companies in the list of restricted
2companies distributed to each retirement system and the State
3Treasurer. These efforts shall include the following, as
4appropriate in the Illinois Investment Policy Board's
5judgment:
6        (1) reviewing and relying on publicly available
7    information regarding expatriated entities, including
8    information provided by nonprofit organizations, research
9    firms, and government entities;
10        (2) contacting asset managers contracted by the
11    retirement systems that invest in expatriated entities;
12        (3) contacting other institutional investors that have
13    divested from or engaged with expatriated entities; and
14        (4) retaining an independent research firm to identify
15    expatriated entities.
16    Within 6 months after effective date of this amendatory Act
17of the 101st General Assembly, the Illinois Investment Policy
18Board shall make its best efforts to identify all companies
19that contract to build a border wall and include those
20companies in the list of restricted companies distributed to
21each retirement system. These efforts shall include the
22following, as appropriate in the Illinois Investment Policy
23Board's judgment:
24        (1) reviewing and relying on publicly available
25    information regarding companies that contract to build a
26    border wall, including information provided by nonprofit

 

 

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

 

 

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

 

 

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

 

 

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1companies pursuant to subsection (f) if clear and convincing
2evidence shows that the value of investments in such companies
3becomes equal to or less than 0.5% of the market value of all
4assets under management by the retirement system. For any
5cessation of divestment authorized by this subsection (h), the
6retirement system shall provide a written notice to the
7Illinois Investment Policy Board in advance of the cessation of
8divestment, setting forth the reasons and justification,
9supported by clear and convincing evidence, for its decision to
10cease divestment under subsection (f).
11    (i) The cost associated with the activities of the Illinois
12Investment Policy Board shall be borne by the boards of each
13pension fund or investment board created under Article 15, 16,
14or 22A of this Code.
15    (j) With respect to actions taken in compliance with this
16Section, including all good-faith determinations regarding
17companies as required by this Section, the retirement system
18and Illinois Investment Policy Board are exempt from any
19conflicting statutory or common law obligations, including any
20fiduciary duties under this Article and any obligations with
21respect to choice of asset managers, investment funds, or
22investments for the retirement system's securities portfolios.
23    (k) It is not the intent of the General Assembly in
24enacting this amendatory Act of the 99th General Assembly to
25cause divestiture from any company based in the United States
26of America. The Illinois Investment Policy Board shall consider

 

 

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1this intent when developing or reviewing the list of restricted
2companies.
3    (l) If any provision of this amendatory Act of the 99th
4General Assembly or its application to any person or
5circumstance is held invalid, the invalidity of that provision
6or application does not affect other provisions or applications
7of this amendatory Act of the 99th General Assembly that can be
8given effect without the invalid provision or application.
9    (m) If any provision of this amendatory Act of the 100th
10General Assembly or its application to any person or
11circumstance is held invalid, the invalidity of that provision
12or application does not affect other provisions or applications
13of this amendatory Act of the 100th General Assembly that can
14be given effect without the invalid provision or application.
15    (n) If any provision of this amendatory Act of the 101st
16General Assembly or its application to any person or
17circumstance is held invalid, the invalidity of that provision
18or application does not affect other provisions or applications
19of this amendatory Act of the 101st General Assembly that can
20be given effect without the invalid provision or application.
21(Source: P.A. 99-128, eff. 7-23-15; 100-551, eff. 1-1-18.)
 
22    Section 99. Effective date. This Act takes effect upon
23becoming law.