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
HB5705 LRB102 26465 RPS 36916 b
1		AN ACT concerning public employee benefits.
2		Be it enacted by the People of the State of Illinois,
3		represented in the General Assembly:
4		Section 5. The Illinois Pension Code is amended by
5		changing Section 1-110.16 as follows:
6		(40 ILCS 5/1-110.16)
7		Sec. 1-110.16. Transactions prohibited by retirement
8		systems; companies that boycott Israel, for-profit companies
9		that contract to shelter migrant children, Iran-restricted
10		companies, Sudan-restricted companies, and expatriated
11		entities, 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.

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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
16		Policy Board. The Illinois Investment Policy Board shall
17		consist of 7 members. Each board of a pension fund or
18		investment board created under Article 15, 16, or 22A of this
19		Code shall appoint one member, and the Governor shall appoint
20		4 members.
21		(c) Notwithstanding any provision of law to the contrary,
22		beginning January 1, 2016, Sections 110.15 and 1-110.6 of this
23		Code shall be administered in accordance with this Section.
24		(d) By April 1, 2016, the Illinois Investment Policy Board
25		shall make its best efforts to identify all Iran-restricted
26		companies, Sudan-restricted companies, and companies that

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1		boycott Israel and assemble those identified companies into a
2		list of restricted companies, to be distributed to each
3		retirement system.
4		These efforts shall include the following, as appropriate
5		in 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
23		of restricted companies on a quarterly basis based on evolving
24		information from, among other sources, those listed in this
25		subsection (d) and distribute any updates to the list of
26		restricted companies to the retirement systems and the State

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1		Treasurer.
2		By April 1, 2018, the Illinois Investment Policy Board
3		shall make its best efforts to identify all expatriated
4		entities and include those companies in the list of restricted
5		companies distributed to each retirement system and the State
6		Treasurer. These efforts shall include the following, as
7		appropriate in the Illinois Investment Policy Board's
8		judgment:
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
20		shall make its best efforts to identify all for-profit
21		companies that contract to shelter migrant children and
22		include those companies in the list of restricted companies
23		distributed to each retirement system. These efforts shall
24		include the following, as appropriate in the Illinois
25		Investment Policy Board's judgment:
26		(1) reviewing and relying on publicly available

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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
15		amendatory Act of the 102nd General Assembly, the Illinois
16		Investment Policy Board shall make its best efforts to
17		identify all companies domiciled in Russia and include those
18		companies in the list of restricted companies distributed to
19		each retirement system. These efforts shall include the
20		following, as appropriate in the Illinois Investment Policy
21		Board'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

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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
9		the following procedures for companies on the list of
10		restricted 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

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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
8		the retirement system shall adhere to the following procedures
9		for 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

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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
10		procedures for restricted companies that are expatriated
11		entities or for-profit companies that contract to shelter
12		migrant 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

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

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

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1		applications of Public Act 102-118 this amendatory Act of the
2		102nd General Assembly that can be given effect without the
3		invalid provision or application.
4		If any provision of this amendatory Act of the 102nd
5		General Assembly or its application to any person or
6		circumstance is held invalid, the invalidity of that provision
7		or application does not affect other provisions or
8		applications of this amendatory Act of the 102nd General
9		Assembly that can be given effect without the invalid
10		provision or application.
11		(Source: P.A. 102-118, eff. 7-23-21.)
12		Section 99. Effective date. This Act takes effect upon
13		becoming law.