Bill Summaries: S737 ADDRESS ESG FACTORS.

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  • Summary date: May 2 2023 - View Summary

    Senate committee substitute amends the 1st edition as follows.

    Deletes new Article 85, State Employee Retirement Protection Act, in GS Chapter 143.

    Amends GS 147-69.7(b) regarding the duties of the State Treasurer in investing and managing assets of funds and programs held by the Treasurer. Eliminates existing authority to consider benefits created by an investment in addition to investment returns only if the State Treasurer determines that the investment providing collateral benefits would be prudent even without the collateral benefits. Adds a new requirement for the State Treasurer, in the evaluation of an investment or evaluation or exercise of any right appurtenant to an investment, consider only pecuniary factors. Defines pecuniary factor to mean one that has a material effect on the financial risk or financial return of an investment based on appropriate investment horizons consistent with the purpose of the fund. Provides for limited evaluation of environmental or social considerations as pecuniary factors. Adds authority for the State Treasurer to, in the evaluation or exercise of any right appurtenant to an investment, reasonably conclude that not exercising such a right is in the best interest of the fund's beneficiaries. 

    Makes conforming changes to the act's effective date provision. 

  • Summary date: Apr 13 2023 - View Summary

    Enacts new GS 143-162.6, as follows. Prohibits State agencies; political subdivisions of the State; trusts, committees, or commissions of any political subdivision of the State from using, enforcing, providing data for use in, or otherwise participating in the creation or use of ESG or ETI policies related to hiring, firing, or evaluating employees. Also prohibits considering ESG, ETI, or related criteria in the awarding of State contracts. Defines environmental, social, and governance (ESG) criteria or economically targeted investments (ETI) requirements to mean using a set of standards to screen potential investments based upon the perceived impact to the environment and the social relationships between a company's employees and the community. Includes in the term how a company's leadership is structured in support of those standards.

    Adds new Article 85, State Employee Retirement Protection Act, in GS Chapter 143, providing as follows. Defines pension benefit plan or plan as any plan; fund; or program established, maintained, or offered by the State or any subdivision, county, municipality, agency, or instrumentality thereof; or any school, college, university, administration, authority, or other enterprise operated by the State, to the extent that by its terms or as a result of surrounding circumstances does either of the following: (1) provides retirement income or other retirement benefits to employees or former employees or (2) results in a deferral of income by employees for a period extending to the termination of covered employment or beyond.

    Requires a fiduciary to discharge duties with respect to a plan solely in the pecuniary interest of the participants and beneficiaries for the exclusive purpose of both of the following: (1) providing pecuniary benefits to participants and their beneficiaries and (2) defraying reasonable expenses of administering the plan. Requires a fiduciary to discharge duties: (1) with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with the relevant matters would use in the conduct of an enterprise of a like character and with like aims; (2) by diversifying the investments of the plan so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so; and (3) in accordance with the documents and instruments governing the plan insofar as the documents and instruments are consistent with this Article.

    Prohibits plan fiduciaries from promoting non-pecuniary benefits or any other non-pecuniary goals. Specifies that environmental, social, corporate governance, or other similarly oriented considerations are pecuniary factors only if they present economic risks or opportunities that qualified investment professionals would treat as material economic considerations under generally accepted investment theories; sets out provisions governing consideration of those factors.

    Requires all shares held directly or indirectly by or on behalf of a pension benefit plan or the beneficiaries thereof to be voted solely in the pecuniary interest of plan participants. Prohibits voting to further non-pecuniary, environmental, social, political, ideological, or other benefits or goals. Prohibits a fiduciary, unless no economically practicable alternative is available, from adopting a practice of following the recommendations of a proxy advisory firm or other service provider unless the firm or service provider has a practice of, and commits in writing to, following proxy voting guidelines consistent with the fiduciary's obligation to act based only on pecuniary factors. Prohibits plan assets, unless no economically practicable alternative is available, from being entrusted to a fiduciary, unless that fiduciary has a practice of, and commits in writing to following guidelines, when engaging with portfolio companies and voting shares or proxies, that match the plan's obligation to act based only on pecuniary factors. Places the authority to vote shares in a State official who is politically accountable to the people of the State. Sets out provisions governing proxy votes.

    Allows the Attorney General to enforce this Article and sets out actions the Attorney General may take.

    Effective October 1, 2023.

    Includes a severability clause.