Minnesota

Title

Key Dates

Nature of
Action

ESG Category

Summary

State Board of Investment Considering Carbon-Neutral Proposal

Adopted and in effect
11/1/2022

Enforcement / Divestment

Promote ESG Factors in Investment and/or Proxy Voting Decisions

■ The Minnesota State Board of Investment is considering a proposal to adopt a goal of making its pension funds carbon-neutral, which is an expansion of its current practice of using shareholder votes to address climate issues.

■ Does not call for a total divestment from fossil fuel companies.

Title

Key Dates

Nature of
Action

ESG Category

Summary

 ■ Prohibits the state retirement board from investing in stocks, debt, or other securities of any company (Listed Company) that the director has determined boycotts mining, energy production, production agriculture, or commercial lumber production. The state board shall, in accordance with prudent investment standards, divest from any stocks, debt, or other securities of any Listed Company that are direct holdings of the state board, and the board must complete divestment by July 1, 2030.

■ In a state contract for goods or services, a vendor must certify that: (1) the vendor does not boycott mining, energy production, production agriculture, or commercial lumber production companies; and (2) the vendor will not boycott mining, energy production, production agriculture, or commercial lumber production companies. This applies to all state agencies, including the Minnesota State Colleges and Universities and to contracts entered into by entities in the legislative branch. . If a court finds that a vendor boycotted mining, energy production, production agriculture, or commercial lumber production companies during the duration of a contract with the state for goods or services, the court must assess a civil penalty of $10,000 on the vendor.

■ Stipulates that a bank, credit union, financial institution, payment processor, savings and loan association, or trust company shall not refuse to provide financial services of any kind to, refrain from continuing to provide existing financial services to, terminate existing financial services with, or otherwise discriminate in the provision of financial services against a person based on the following: (1) the person's political affiliation; or (2) any value-based or impact-based criteria, including but not limited to social credit scores or environmental, social, and governance credit factors. A person who is refused services may bring an action for injunctive relief, a civil penalty of $10,000, and actual, incidental, and consequential damages sustained by the person as a result of the refusal. If a court finds a violation of subdivision 1, the court must assess a civil penalty of $10,000 on the bank, credit union, financial institution, payment processor, savings and loan association, or trust company, in addition to an award of damages. A plaintiff or class successful in a legal or equitable action under this section is entitled to the costs of the action, plus reasonable attorney fees.

■ Requires the State Board of Investment, when making investment decisions to maximize returns, minimize risk, or execute fiduciary duty, to consider any sustainability factor that may impact the performance of individual investments or of the fund as a whole. Sustainability factors include corporate governance and leadership, environmental, social, and human capital factors. Requires any investment manager engaged by the board to manage fund assets to disclose annually (1) how it considers sustainability factors relating to impacts on the performance of individual investments and of the fund as a whole and (2) which sustainability factors it has not considered when making investment decisions during the prior 12 months and an explanation for this omission.

■ Requires the state board to address climate change-related risks in its in its annual and investment reports, including (1) how it identifies these risks and assesses their financial impact on the state board's operations, (2) current and anticipated risks to the board's investment portfolio and the board's strategies to respond, (3) potential long-term risks and opportunities created by multiple scenarios and regulations, (4) how the board is managing risks to its operation, and (5) how the board considers any SEC-required climate reporting.  Set to become effective January 1, 2025, if enacted. 

■ Requires the board to identify investment opportunities that support a low-carbon economy, evaluate whether investment managers are transitioning to a business model with a goal of a low-carbon economy, and work with providers to create metrics and standards to evaluate transition readiness and resiliency for companies in high-impact sectors. Set to become effective January 1, 2025, if enacted.  

■ Requires the board to address and mitigate climate change risk in investing fund assets by directly engaging with providers, proxy voting, periodically reviewing its procedures for the above, and establishing an advisory panel to provide the board with current scientific data. Set to become effective January 1, 2025, if enacted.  

Title

Key Dates

Nature of
Action

ESG Category

Summary

SF1225/HB707: State Board of Investment prohibited from investing in assets that exclude Minnesota-based energy or natural resources companies or Minnesota-based agricultural or livestock companies

Introduced, but did not pass in 2024 legislative session

Legislation

Target Entities That Boycott Certain Industries

■ Prohibits the State Board of Investment from investing in assets intentionally excluding Minnesota-based energy or natural resource companies or Minnesota-based agricultural or livestock companies to further the ESG-based grade or rating. Requires the State Board to divest from such assets.

■ Does not apply to indirect holdings of inactively managed investment funds. But, the State Board must inform the managers of impacted funds to consider removing those assets from the fund or to create a similar actively managed fund with indirect holdings that do not include those assets. Private equity funds are deemed to be actively managed investment funds.

■ Prohibits financial institutions from refusing to provide financial services to, or from otherwise discriminating in the provision of financial services against, a person solely based on the person's political affiliation or any value-based or impact-based criteria.

Prohibit Discrimination on Basis of Social Credit or ESG Scores

HF3322: State Retirement Plan Protection Act

Introduced, but did not pass in 2023 legislative session

Legislation

Restrict Use of ESG Factors; Focus on Pecuniary Characteristics

■ When investing the assets of a pension fund, the State Board of Investment, or another person authorized to invest on behalf of the State Board of Investment, must make decisions based solely on pecuniary factors and must not subordinate the financial interests of plan participants and benefit recipients to other objectives, including sacrificing investment return or undertaking additional risk to promote a nonpecuniary factor or objective. In addition, when exercising shareholder rights with respect to the assets of a pension fund, including but not limited to proxy voting, the State Board of Investment, or another person authorized to exercise shareholder rights on behalf of the State Board of Investment, must only consider pecuniary factors and must not subordinate the financial interests of plan participants and benefit recipients to other nonpecuniary factors or objectives.

■ A "pecuniary factor" means a factor that the State Board of Investment or another person authorized to invest on behalf of the State Board of Investment, prudently expects to have a material effect on the risk or return of an investment. Pecuniary factor does not mean consideration of the furtherance of any social, political, or ideological interest.

HF1902: Companies that boycott mining, energy production, production agriculture, or commercial lumber production; State Board of Investment prohibited from investing

Introduced, but did not pass in 2023 legislative session

Legislation

Target Entities that Boycott Certain Industries

■ Prohibits the state board from investing in securities of any listed company that boycotts mining, energy production, production agriculture, or commercial lumber production. Requires divestment by July 1, 2028.

■ Only applies to assets in the Minnesota combined investment funds established under certain laws. Does not apply to other funds managed and administered by the state board.

■ Prohibits state contracts, including those entered into by legislative branch or state colleges and universities, for goods or services with a vendor that boycotts mining, energy production, production agriculture, or commercial lumber production companies.

■ Prohibits financial institutions from refusing to provide financial services to, or otherwise discriminate against, a person based on political affiliation or any value-based or impact-based criteria, including, but not limited to, social credit scores or ESG credit factors. Allows service if the standards are fully disclosed and explained to the potential customer or investor before entering into a contract.

Prohibit Discrimination on Basis of Social Credit or ESG Scores

SF940: The Stop ESG and Social Credit Score Discrimination Act

Introduced, but did not pass in 2023 legislative session

Legislation

Target Entities that Boycott Certain Industries

■ Requires the State Board of Investment to divest from listed companies boycotting mining, energy production, production agriculture, or commercial lumber production by July 1, 2028. The state board is required to submit an annual report with the name of each listed company.

■ In contracts for goods or services with any state agency, vendors are required to provide written certification that they do not, and will not, boycott the above industries. If a court finds that a vendor boycotted an applicable industry during the contract, the court must assess a civil penalty of $10,000.00 on the vendor.

■ Prohibits financial institutions from refusing to provide financial services to, or otherwise discriminate against, a person based on political affiliation or any value-based or impact-based criteria, including social credit scores or ESG credit factors, unless such ESG standards are fully disclosed and explained to the customer before entering into a contract for the service. A person who is refused services based on such discrimination may bring an action for injunctive relief, a civil penalty of $10,000, and other damages sustained by the person. A court must also assess an additional civil penalty of $10,000.

Prohibit Discrimination on Basis of Social Credit or ESG Scores

HF4904: Energy Discrimination Elimination Act

Introduced, but did not pass in 2022 legislative session

Legislation

Target Entities that Boycott Certain Industries

■ Applies to state pensions to which the law is designed to apply as determined by the Commissioner of Commerce.

■ Requires the Commissioner to maintain a list of financial companies that boycott fossil fuel companies. Prohibits investment in listed companies. Requires divestment from listed companies that do not cease their boycotts within 90 days of receiving notice of the state entity's intention to divest.

SF4441/HF4574: Stop ESG and Social Credit Score Discrimination Act

Introduced, but did not pass in 2022 legislative session

Legislation

Target Entities that Boycott Certain Industries

■ Applies to the assets of the Minnesota State Retirement System, the Public Employees Retirement Association, and the Teachers Retirement Association.

■ Prohibits investment in companies that boycott mining, energy production, production agriculture, or commercial lumber production. Requires divestment by July 1, 2027 from restricted companies.

Prohibit Discrimination on Basis of Social Credit or ESG Scores

SF3384/HF4028: Report Mandate on Impact of Climate Change on State’s Fossil Fuel Investments

Introduced, but did not pass in 2022 legislative session

Legislation

Promote ESG Factors in Investment and/or Proxy Voting Decisions

■ Requires the Minnesota State Board of Investment to prepare a report addressing the financial risks of staying invested in fossil fuel companies and identifying alternative investments.