Legislation/Guidance in Effect
Title |
Key Dates |
Nature of |
ESG Category |
|
Governor: Protecting State Investments from ESG Practices |
Adopted and in effect |
Governor Position |
Restrict Use of ESG Factors; Focus on Pecuniary Characteristics |
■ On January 17, 2023, Republican Governor Kim Reynolds proposed the following actions to "[protect] state investments from ESG practices": 1) investment firms that manage the state's money must not boycott fossil fuel energy or firearms companies, or generally invest funds to further environmental, social, governance, political, or ideological interests over maximized returns; and 2) the state must scrutinize companies in which it invests public funds and divest from those that engage in ESG practices. Update 1/24/2024: Governor Reynolds Releases Three Bills to Protect Iowa Land, Cut Red Tape, and Stop Woke Corporatism |
Target Entities that Boycott Certain Industries |
Pending Legislation
Title |
Key Dates |
Nature of |
ESG Category |
|
HSB667: Economic Interests of Participants and Beneficiaries of Public Pension Benefit Plans |
Introduced 2/6/2024 |
Legislation | Restrict Use of ESG Factors; Focus on Pecuniary Characteristics |
■ The bill requires a fiduciary to vote all shares held directly or indirectly in the "best economic interest" of the plan participants and beneficiaries. It also prohibits a proxy advisory firm from providing proxy voting advice regarding shareholder proposals to an entity that the state regulates unless the advice is based solely on the best economic interests of the shareholders. “Best economic interest” means investment pursuant to the objective of maximizing risk-adjusted investment returns of the participants and beneficiaries of a plan over a time horizon consistent with the risk management profile of the plan. A fiduciary shall not vote in a manner that does any of the following: (i) subordinates the economic interest of the plan participants and beneficiaries to any ESG or ideological goal, or (ii) promotes any ESG or ideological goal unless based on economic analysis, it is determined that the vote is in the best economic interest of the participants and beneficiaries. ■ With respect to a shareholder proposal, there is a rebuttable presumption that a fiduciary votes its shares solely in the best economic interest of participants and beneficiaries if the fiduciary’s vote follows the recommendation of the board of directors of the issuer of the shares (as long as the board includes a majority of independent directors), or if the fiduciary or a third party conducts and documents an economic analysis showing that the vote is in the best economic interest of participants and beneficiaries. ■ The bill requires a fiduciary to annually report to the state treasurer any vote inconsistent with the recommendation of an issuer’s board of directors and the economic analysis on which the fiduciary relied. This report must be certified by the fiduciary’s CEO and CFO. The bill also requires a fiduciary to review its economic analysis every three years to ensure that the fiduciary’s models, procedures, and processes predict the best economic interest of the plan participants and beneficiaries. ■ The bill also permits an investor, beneficiary, or participant of a plan to submit a request for the economic analysis conducted for a fiduciary’s vote to the investment company that owns shares of an enterprise regulated by the state or the plan if the individual has reason to believe that shares of the plan have not been voted in the best economic interest of the plan participants and beneficiaries. The investment company or plan must respond in writing within 90 days by providing the requested economic analysis or informing the individual that no economic analysis was conducted or the vote aligned with the recommendation of the board of directors of the issuer of the shares. The investment company or plan must provide such a response without cost up to twice annually per consumer. ■ The bill allows the AG to investigate any suspected violations of the bill and to enforce the bill’s provisions by initiating an action in the name of the state and seeking civil penalties for each violation. Each share not voted in the best economic interest of the shareholder qualifies as a separate violation and constitutes irreparable harm. The bill requires civil penalties to be in equity and to not exceed $1,000 per violation. Civil penalties collected under the bill are deposited in the general fund of the state. |
HF2291/SF2032: Reviews of Presidential Executive Orders |
Introduced |
Legislation | Restrict Use of ESG Factors; Focus on Pecuniary Characteristics |
■ This bill relates to executive orders issued by the President of the U.S. The bill allows the legislative council to review an executive order issued by the President and not passed into law by the U.S. Congress. The legislative council may refer such orders to the state AG and Governor for further review. The bill requires the AG to determine whether an order is constitutional and to decide whether to seek an exemption from the order or a ruling on its constitutionality. ■ The bill prohibits the state, a political subdivision of the state, or any publicly funded organization from enforcing a presidential executive order that restricts a person’s rights or which the AG has determined to be unconstitutional and which is related to certain enumerated subjects, including: (i) a pandemic or other health emergency; (ii) the regulation of natural resources, including coal and oil; (iii) the regulation of the agriculture industry; (iv) the use of land; (v) the regulation of the financial sector as it relates to ESG standards; or (vi) the regulation of the constitutional right to bear arms. |
SSB1094/507: A bill for an act concerning public contracts with companies that boycott certain companies or that engage in nonpecuniary social investment policies |
Introduced in 2023, carried over to 2024 |
Legislation |
Target Entities That Boycott Certain Industries |
■ Restricts Iowa public funds and public entities from entering into a contract for investment or management services with "scrutinized companies" that have engaged in nonpecuniary social investment or a boycott of certain firearms- and fossil fuel-related companies on behalf of a public entity. |
HF27: A bill for an act relating to executive orders of the president of the United States |
Introduced in 2023, carried over to 2024 |
Legislation |
Restrict Use of ESG Factors; Focus on Pecuniary Characteristics |
■ Prohibits the state, a political subdivision of the state, or any other publicly funded organization from implementing an executive order issued by the U.S. president that restricts a person's rights or that the attorney general determines to be unconstitutional and that relates to, among other things, the regulation of the financial sector as it relates to ESG standards or the regulation of the constitutional right to bear arms. |
Past/Inactive Legislation
Title |
Key Dates |
Nature of |
ESG Category |
|
HF2/653: Public contracts, Public fund investing, and lending practices with certain companies that engage in economic boycotts based on ESG criteria | Introduced, but did not pass in 2023 legislative session | Legislation | Restrict Use of ESG Factors; Focus on Pecuniary Characteristics | ■ Prohibits a public fund from granting proxy voting authority to any person who is not a part of the public fund, adopting a practice of following the recommendations of a proxy advisor, or entering into an agreement with an investment advisor unless that person has a practice of and commits to following guidelines to act solely in the financial interest of participants and beneficiaries of the public fund and not consider any factors with a purpose to further ESG goals. ■ Prohibits a public entity from entering into a contract of $1,000 or greater with a company that is engaged in an economic boycott based on ESG criteria. Requires a contract subject to the requirements to contain a written verification from the company that it does not (and will not) engage in economic boycotts. ■ Does not apply if no economically practicable alternative is available. |