THE SENATE

S.B. NO.

3085

THIRTIETH LEGISLATURE, 2020

S.D. 1

STATE OF HAWAII

 

 

 

 

 

 

A BILL FOR AN ACT

 

 

RELATING TO SOCIALLY RESPONSIBLE INVESTING.

 

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 


     SECTION 1.  The legislature finds that consideration of factors relevant to the environmental impact, social impact, and governance of investments is vital for maximizing the safety and performance of public funds.  Such factors are indicative of the overall performance of an investment and are strong indicators of its long-term value.  Public agencies and governments have a duty to recognize and evaluate these materially relevant factors.

     The purpose of this Act is to prudently integrate socially responsible factors into the investment decision-making, investment analysis, portfolio construction, due diligence, and investment ownership of public funds to minimize projected risks, more effectively execute fiduciary duties, and contribute to a more just, accountable, and sustainable state.

     SECTION 2.  Chapter 36, Hawaii Revised Statutes, is amended by adding a new part to be appropriately designated and to read as follows:

"PArT    .  SOCIALLY RESPONSIBLE INVESTING

     §   -1  Definitions.  As used in this part:

     "Entity" means an entity with management and oversight or fiduciary responsibility over the endowment funds of the University of Hawaii, funds of the employees' retirement system,  employer-union trust fund, Hawaii tobacco prevention and control trust fund, Hawaii children's trust fund, State of Hawaii endowment fund, or any other endowment, trust, or investment fund established by statute or maintained by state agencies or offices.

     "Socially responsible investing" means an investment strategy that considers the factors that may have a material and relevant financial impact on the safety or performance of an investment, and which are complementary to fiduciary duty and  financial factors and financial accounting, including environmental impact, social impact, and governance of investment.

     §   -2  Socially responsible investing.  (a)  Notwithstanding any law to the contrary, each entity shall develop, publish, and implement socially responsible investment policies applicable to the management of all public funds under its control.  The socially responsible investment policy may be incorporated in existing investment policies developed, published, and implemented by the entity.

     (b)  The socially responsible investment policy shall include material, relevant, and decision-useful sustainability factors to be considered in evaluating investment decisions, including, but not limited to:

     (1)  Corporate governance and leadership factors;

     (2)  Environmental factors;

     (3)  Social capital factors;

     (4)  Human capital factors; and

     (5)  Business model and innovation factors.

     (c)  Socially responsible policies shall support, and not supplant, the fiduciary responsibility to the members and beneficiaries of any retirement system or trust fund affected by this Part.

     (d)  An entity may adopt a nationally or internationally recognized policy that addresses these socially responsible factors, including, but not limited to, the Principles of Responsible Investment, to satisfy this Part.  An entity that has adopted a policy, that meets the same or substantially similar criteria, such as the Principles of Responsible Investment, may utilize that adopted policy to satisfy the requirements of this part.

     §   -3  Socially responsible investment policy filing requirement.  An entity shall file a copy of its investment policy with the department of budget and finance and the legislature within 30 days after its adoption.  Should an entity have an existing policy that meets the socially responsible factors outlined in section 2 herein, it shall file such policy with the department of budget and finance and the legislature.  Whenever an entity changes the socially responsible factors in its investment policy, it shall file a copy of the modified policy with the department of budget and finance and the legislature within 30 days.

     §   -4  Consideration of socially responsible investment factors in decision-making.  (a)  Each entity shall prudently integrate socially responsible factors into its investment decision-making, investment analysis, portfolio construction, due diligence, and investment ownership of public funds to minimize projected risks, and more effectively execute fiduciary duty.

     (b)  Socially responsible factors may include, but are not limited to, the following:

     (1)  Corporate governance and leadership factors, such as the independence of boards and auditors, the expertise and competence of corporate boards and executives, systemic risk management practices, executive compensation structures, transparency and reporting, leadership diversity, regulatory and legal compliance, shareholder rights, and ethical conduct;

     (2)  Environmental factors that may have an adverse or positive financial impact on investment performance, such as greenhouse gas emissions, air quality, energy management, water and wastewater management, waste and hazardous materials management, and ecological impacts;

     (3)  Social capital factors that impact relationships with key outside parties, such as customers, local communities, the public, and the government, which may impact investment performance.  Social capital factors include human rights, customer welfare, customer privacy, data security, access and affordability, selling practices and product labeling, community reinvestment, and community relations;

     (4)  Human capital factors that recognize that the workforce is an important asset to delivering long-term value, including factors such as labor practices, responsible contractor and responsible bidder policies, employee health and safety, employee engagement, diversity and inclusion, and incentives and compensation; and

     (5)  Business model and innovation factors that reflect an ability to plan and forecast opportunities and risks, and whether a company can create long-term shareholder value, including factors such as supply chain management, materials sourcing and efficiency, business model resilience, product design and life cycle management, and physical impacts of climate change.

     (c)  Socially responsible factors may be analyzed in a variety of ways, including, but not limited to:

     (1)  Direct financial impacts and risks;

     (2)  Legal, regulatory, and policy impacts and risks;

     (3)  Assessment against industry norms, best practices, and competitive drivers; and

     (4)  Stakeholder engagement.

     (d)  Nothing in this part prohibits an entity from integrating additional factors into its investment decision‑making, investment analysis, portfolio construction, due diligence, and investment ownership of public funds.  This part shall not apply to financial institution time deposits or financial institution processing services."

     SECTION 3.  Each entity shall publish an annual investment report that includes a summary of the proportion of its investments in accordance with socially responsible investment policies pursuant to this Act.  If an entity has an existing annual investment report that includes a summary of the proportion of its investments in accordance with the socially responsible investment policies pursuant to this Act, it may publish that report to meet the requirements of this section.

     SECTION 4.  This Act shall take effect upon January 1, 2050.



 

Report Title:

Socially Responsible Investing; Endowment Funds; Trust Funds; Investment Funds

 

Description:

Incorporates socially responsible investing in the investment decision-making of endowment, trust, or investment funds established by statute or maintained by state agencies or offices that are authorized by law to invest public funds.  Requires an annual reporting.  Effective 1/1/2050.  (SD1)

 

 

 

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.