Indiana Senate committee advances pared down anti-ESG bill
A bill designed to prevent the state’s pension fund from working with asset managers that use environmental, social and governmental—or ESG—considerations in their investment strategies was advanced by the Indiana Senate Pensions and Labor Committee on Wednesday.
As it was originally written, House Bill 1008, authored by Rep. Ethan Manning, R-Logansport, was projected to result in a whopping $6.7 billion loss to the Indiana Public Retirement System, or INPRS, over the next decade. That number was based on the assumption that financial institutions would not be able to work with INPRS due to its hardline stance against ESG investing, according to State Treasurer Daniel Elliot.
That prompted lawmakers to make significant changes to the bill, including exempting private market funds, which make up about 15% of the state’s total pension investments, from the legislation. The amended bill also excludes the state police pension trust and the pension system’s defined contribution plans.
Manning said the revisions would reduce the fiscal impact to zero and clear up any confusion while keeping intact the original intent of the legislation.
“The big idea here is that financial returns trump all, period, full stop,” Manning told the committee. “That’s the point of the bill. You can do all of the ESG funds and investing you want, but they have to have the highest returns, lowest risk and lowest management fees.”
The legislation also imposes reporting requirements on INPRS, requiring the agency to provide an annual count of all proxy votes made by fiduciaries.
Enforcement of the law would fall under the treasurer’s office, which some lawmakers found problematic.
Sen. Greg Walker, R-Columbus, who voted to advance the bill, questioned how the treasurer’s office was more qualified than the INPRS board to make determinations about ESG policies.
Elliot said that while INPRS is “doing a great job,” his office has staff members who are better equipped to more closely examine the pension system’s investments.
“They are making some important strides, but what they don’t have is an entity that’s answerable to the voters,” Elliot said, noting that he is an elected official. “I have uniquely qualified people to look at these investments and give us answers very, very quickly.”
Greg Ellis, vice president of energy and environment policy for the Indiana Chamber, called the bill “anti-free market” and feared the impact it might have on companies that consider expanding their operations in Indiana.
“We believe this picks winners and losers,” Ellis said. “We think this bill might have a chilling effect on the Indiana economy.”
Manning said that interpretation was a “deliberate misreading” of the legislation.
Groups representing gun manufacturers and fossil fuel companies testified in support of the bill, saying that banks and credit card companies have refused to work with them due to ESG policies.
“Every member of our industry has been turned down by credit processors,” said Christopher Lee, a lobbyist for the National Shooting Sports Foundation.
Pension fund managers including Blackrock, State Street and Vanguard have come under fire from Republicans at the state and national level for practicing ESG investing. ESG funds have exploded in popularity in recent years, partly in response to a desire from investors to put their money toward what are perceived as noble causes.
The committee advanced the bill with all three Democrats on the committee voting against the measure. The legislation heads to the Senate floor.