Sec. 20. Consideration of sustainable investment factors in decision-making.

473 words·~2 min read·/il/chapter-30/act-238/20

A research copy — for the controlling text, always check the official state or federal source. Not legal advice.

(a)A public agency shall prudently integrate sustainability factors into its investment decision-making, investment analysis, portfolio construction, due diligence, and investment ownership in order to maximize anticipated financial returns, minimize projected risk, and more effectively execute its fiduciary duty.

(b)Sustainability factors may include, but are not limited to, the following:

(1)Corporate governance and leadership factors, such as the independence of boards

and auditors, the expertise and competence of corporate boards and executives, systemic risk management practices, executive compensation structures, transparency and reporting, leadership diversity, regulatory and legal compliance, shareholder rights, and ethical conduct.

(2)Environmental factors that may have an adverse or positive financial impact on

investment performance, such as greenhouse gas emissions, air quality, energy management, water and wastewater management, waste and hazardous materials management, and ecological impacts.

(3)Social capital factors that impact relationships with key outside parties, such as

customers, local communities, the public, and the government, which may impact investment performance. Social capital factors include human rights, customer welfare, customer privacy, data security, access and affordability, selling practices and product labeling, community reinvestment, and community relations.

(4)Human capital factors that recognize that the workforce is an important asset to

delivering long-term value, including factors such as labor practices, responsible contractor and responsible bidder policies, employee health and safety, employee engagement, diversity and inclusion, and incentives and compensation.

(5)Business model and innovation factors that reflect an ability to plan and forecast

opportunities and risks, and whether a company can create long-term shareholder value, including factors such as supply chain management, materials sourcing and efficiency, business model resilience, product design and life cycle management, and physical impacts of climate change.

(c)Sustainability factors may be analyzed in a variety of ways, including, but not limited to:

(1)direct financial impacts and risks;

(2)legal, regulatory, and policy impacts and risks;

(3)against industry norms, best practices, and competitive drivers; and

(4)stakeholder engagement.

(d)Nothing in this Act prohibits a public agency or governmental unit from integrating additional factors into its investment decision-making, investment analysis, portfolio construction, due diligence, and investment ownership of public funds. This Act shall not apply to financial institution time deposits or financial institution processing services.

(e)Beginning January 1, 2024, investment managers shall disclose, prior to the award of a contract, a description of any process through which the manager prudently integrates the sustainability factors described in subsection

(b)into their investment decision-making, investment analysis, portfolio construction, due diligence, and investment ownership in order to maximize anticipated risk-adjusted financial returns, identify projected risk, and execute the manager's fiduciary duties. Investment managers shall provide this disclosure to each public agency, pension fund, retirement system, or governmental unit for whom the investment manager is seeking selection as a fiduciary before acting in this official capacity.