Legislation/Guidance in Effect
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Title |
Key Dates |
Nature of |
ESG Category |
|
| Attorney General Miyares Issues AG Opinion Prohibiting ESG Influences On VRS Investment Decisions | Adopted and in effect 8/16/2024 |
AG Position | Restrict Use of ESG Factors; Focus on Pecuniary Characteristics |
■The Virginia attorney general has issued an official AG Opinion, at the request of a Republican state lawmaker, on the permissibility of basing Virginia Retirement System (VRS) investment decisions on ESG criteria. The AG Opinion confirms that Virginia law imposes fiduciary duties on the VRS Board of Trustees that preclude it from basing investment decisions on ESG policies rather than financial considerations. ■As the AG Opinion explains, "Virginia law makes clear that the VRS is to be administered only on behalf of its members or beneficiaries. Other Virginians and society at large are not the intended beneficiaries of the VRS....[t]he sole purpose of the retirement system is to foster financial security for public employees upon their departure from public service...because the purpose of the VRS is thus limited, other public policy concerns and initiatives necessarily are beyond the scope of the VRS Board's authority and role as trustee. Accordingly, a general public benefit, not matter how salutary, is insufficient to warrant investment by the VRS Board....Consequently, the fiduciary duties imposed on the VRS Board under Virginia law direct that the Board make its investment decisions based on securing the best financial results for VRS beneficiaries and not in furtherance of ESG policy goals." |
Past/Inactive Legislation
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Title |
Key Dates |
Nature of |
ESG Category |
|
| HB388: Virginia Retirement System; investments; diversity, equity, and inclusion investing restricted | Introduced, but did not pass in the 2024 legislative session | Legislation | Restrict Use of ESG Factors; Focus on Pecuniary Characteristics |
■ HB388 provides that except as otherwise provided in a state investment policy and unless the Board of Trustees of the Virginia Retirement System (VRS) can demonstrate that a social investment, defined in the bill, would provide a superior rate of return compared to a similar investment that is not a social investment with a similar time horizon and risk, neither the Board nor any external fiduciary utilized by the Board may invest or make recommendations regarding state funds for the purpose of social investment on or after July 1, 2024. ■ Social investment” is defined as “an investment that is based on diversity, equity, and inclusion in the investment, commitment, voting of shares, or engagement with portfolio companies with public funds for a purpose of obtaining an effect other than a maximized return for the Retirement System.” ■ HB388’s fiscal impact statement included the following observations from VRS: “VRS is concerned that this bill as drafted will impair its ability to fulfill its fiduciary responsibility to its members, retirees, and beneficiaries by constraining its ability to invest in the most beneficial investments due to the requirement to carve out any companies that may be considered “social investments” that VRS cannot necessarily demonstrate would definitively provide a superior return… There is no standardized criteria, screen or definition for “social investment” that uses the parameters set out in this legislation. Therefore, determining which companies fit within the definition of “social investment” in the legislation will be extremely problematic. While the legislation provides a definition, as a practical matter there are no established parameters that could be applied by the VRS custodian (BNY Mellon) or managers that could be used as screens to identify any potential investments in which VRS participates that meet the legislative definition. Further, there is not a readily available list of each company’s diversity, equity, and inclusion criteria. Therefore, just attempting to identify allowable investments under the legislation will be extremely challenging, costly, and time consuming as well as divert resources away from overall management and investment of trust assets." |
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HB2335/SB1437: Restrictions on Virginia Retirement System ESG Investing |
Introduced, but did not pass in the 2023 legislative session |
Legislation |
Restrict Use of ESG Factors; Focus on Pecuniary Characteristics |
■ Prohibits the Board of Trustees of the Virginia Retirement System from engaging in ESG investing unless such “social investment” would provide a superior rate of return compared to a traditional pecuniary investment with a similar time horizon and risk. |
|
SB213/HB645: Virginia Retirement System and Local Retirement Systems; Fossil Fuel Divestment; Report |
Introduced, but did not pass in the 2022 legislative session |
Legislation |
Promote Divestment from Certain Industries |
■ Applies to the Board of the Virginia Retirement System and to local retirement systems. |
