PEN CD-DIVEST FOSSIL FUELS

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HB3961 - 104th General Assembly

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104TH GENERAL ASSEMBLY
State of Illinois
2025 and 2026
HB3961

Introduced 2/25/2025, by Rep. Will Guzzardi - Camille Y. Lilly

SYNOPSIS AS INTRODUCED:

40 ILCS 5/1-110.18 new

Amends the General Provisions Article of the Illinois Pension Code.
Provides that the amendatory Act may be referred to as the Fossil Fuel
Divestment Act. With regard to the retirement systems established under
the General Assembly, State Employees, State Universities, Downstate
Teachers, or Judges Article of the Code and the Illinois State Board of
Investment, prohibits direct investment of any additional pension assets
in the stocks, securities, or other obligations of any fossil fuel company
or any subsidiary, affiliate, or parent of a fossil fuel company. Provides
that each board of trustees of a pension system shall ensure the pension
system does not make further indirect investments unless, upon exercising
due diligence, the board of trustees is satisfied that the investment
vehicle is unlikely to have more than 2% of its assets invested in fossil
fuel companies. Requires pension system trustees to identify the pension
system's holdings, whether directly or indirectly invested, including
private investments. Requires pension system trustees to identify holdings
that are invested in the stocks, securities, equities, fixed income,
corporate bonds, prime commercial paper, or other obligations of fossil
fuel companies. Requires pension systems to, in accordance with sound
investment criteria and consistent with fiduciary obligations, divest any
fossil fuel holdings, which must be completed by January 1, 2030. Requires
pension systems to adopt an update to their written investment policies if
necessary. Requires each pension system to disclose the analytic methods
used, if any, in determining the climate-related financial risks posed by
its fossil fuel investments (both publicly traded and private investments)
and the results of the analysis. Sets forth provisions concerning
definitions, de minimis exposure to fossil fuel securities, and annual
reporting. Effective immediately.
LRB104 12439 RPS 22758 b

A BILL FOR

HB3961
LRB104 12439 RPS 22758 b
1

AN ACT concerning public employee benefits.

2

Be it enacted by the People of the State of Illinois,
3
represented in the General Assembly:

4

Section 1.
This Act may be referred to as the Fossil Fuel
5
Divestment Act.

6

Section 5.
Findings.
The General Assembly finds that:
7

(1) Climate change is a real and serious threat to the
8

health, welfare, and prosperity of all Illinoisans, now
9

and in the future. Scientific evidence indicates that
10

maintaining the status quo of fossil fuel energy
11

production will lead to catastrophic results.
12

(2) Continued investment in the fossil fuel industry
13

is counterproductive to the goals set forth in the Energy
14

Transition Act. That Act, passed by the Illinois General
15

Assembly and signed into law in 2021, commits the State to
16

phasing out carbon emissions from the energy and transport
17

sectors and requires Illinois to be 100% reliant on
18

renewable energy by 2050.
19

(3) The threats posed by climate change, and the
20

necessary transformation of the global energy system to
21

mitigate it, will have a serious negative impact on
22

investors whose assets are not aligned with the goal of
23

keeping the global average temperature increase below 1.5

HB3961
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LRB104 12439 RPS 22758 b
1

degrees Celsius.
2

(4) Continued investment in fossil fuel-related
3

industries poses unacceptable risk to the long-term
4

sustainability of State and local pension funds that are
5

under the State Treasurer's control; to the long-term
6

sustainability of $26,000,000,000 of the State's
7

investments, $17,000,000,000 in the programs established
8

pursuant to Section 529 of the Internal Revenue Code,
9

$12,000,000,000 of the Illinois Funds, $80,000,000 of the
10

Secure Choice Retirement Savings Programs, and $30,000,000
11

in the ABLE Account Program; and to the sustainability of
12

other Illinois municipal and county funds.
13

(5) Because the continued investment in fossil
14

fuel-related industries poses unacceptable risk to these
15

pension systems and State investments, those who hold
16

investment authority over these systems should divest from
17

fossil fuel companies and fossil fuel infrastructure. Such
18

entities are encouraged to invest in climate change
19

solutions where consistent with acceptable financial risk.

20

Section 10.
The Illinois Pension Code is amended by adding
21
Section 1-110.18 as follows:

22

(40 ILCS 5/1-110.18 new)
23

Sec. 1-110.18.
Fossil fuel investment prohibited.
24

(a) In this Section:

HB3961
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LRB104 12439 RPS 22758 b
1

"Fossil fuel" means coal, petroleum, natural gas, or any
2
derivative of coal, petroleum, or natural gas that is used for
3
fuel.
4

"Fossil fuel company" means any company, including any
5
subsidiary, affiliate, or parent of a company, that: (1) is
6
among the 200 publicly traded companies with the largest
7
fossil fuel reserves in the world; (2) is among the 30 largest
8
public company owners in the world of coal-fired power plants;
9
(3) has as its core business the construction or operation of
10
fossil fuel infrastructure; (4) has as its core business the
11
exploration, extraction, refining, processing, or distribution
12
of fossil fuels; or (5) receives more than 2% of its gross
13
revenue from companies that meet the definition under item
14
(1), (2), (3), or (4) of this definition.
15

"Fossil fuel infrastructure" means oil or gas wells; oil
16
or gas pipelines and refineries; oil, coal, or gas-fired power
17
plants; oil and gas storage tanks; fossil fuel export
18
terminals; and any other infrastructure used exclusively for
19
fossil fuels.
20

"Indirect investment" means a holding in an investment
21
vehicle, whether publicly or privately traded, that directly
22
or indirectly owns more than a 1% interest in one or more
23
individual fossil fuel companies.
24

"Pension system" means a pension fund or retirement system
25
established under Article 2, 14, 15, 16, or 18 or the Illinois
26
State Board of Investment.

HB3961
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LRB104 12439 RPS 22758 b
1

(b) Beginning on the effective date of this amendatory Act
2
of the 104th General Assembly, in accordance with sound
3
investment criteria and consistent with fiduciary obligations,
4
a pension system shall not directly invest any additional
5
pension assets in the stocks, securities, or other obligations
6
of any fossil fuel company or any subsidiary, affiliate, or
7
parent of any fossil fuel company. In addition, each board of
8
trustees of a pension system shall ensure the pension system
9
does not make further indirect investments unless, upon
10
exercising due diligence, the board of trustees is satisfied
11
that the investment vehicle is unlikely to have more than 2% of
12
its assets invested in fossil fuel companies. The board of
13
trustees of a pension system shall not invest in any prime
14
commercial paper or corporate bonds issued by a fossil fuel
15
company.
16

(c) Within 90 days after the effective date of this
17
amendatory Act of the 104th General Assembly, pension system
18
trustees shall identify the pension system's holdings, whether
19
directly or indirectly invested, including private
20
investments. The report shall identify holdings that are
21
invested in the stocks, securities, equities, fixed income,
22
corporate bonds, prime commercial paper, or other obligations
23
of fossil fuel companies. For directly invested assets, the
24
name and subject of the investment, the asset class,
25
acquisition dates, and its current value shall be identified.
26
For indirectly invested assets, including private investments,

HB3961
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LRB104 12439 RPS 22758 b
1
the name and subject of the investment, the name of the General
2
Partner, the investment vehicle, the initial date and amount
3
invested, the fee structure, liquidity restrictions, if any,
4
and the actual or anticipated exit date shall be disclosed.
5
Such information shall be submitted as a report to the General
6
Assembly and posted on each pension system's publicly
7
accessible website within 180 days after the effective date of
8
this amendatory Act of the 104th General Assembly. Such
9
reports shall be updated and posted quarterly thereafter.
10

(d)(1) The board of trustees of a pension system shall, in
11
accordance with sound investment criteria and consistent with
12
fiduciary obligations, divest any fossil fuel holdings.
13
Divestment pursuant to this subsection must be completed by
14
January 1, 2030. Nothing in this subsection precludes de
15
minimis exposure of any funds held by the board to the stocks,
16
securities, or other obligations of any fossil fuel company or
17
any subsidiary, affiliate, or parent of any fossil fuel
18
company.
19

(2) Except as otherwise provided, trustees of the
20

pension systems shall, in accordance with sound investment
21

criteria and consistent with fiduciary obligations, divest
22

any indirectly held investments no later than January 1,
23

2030. Funds held in any investment vehicle that imposes
24

liquidity restrictions shall be divested as soon as
25

fiscally responsible but no later than January 1, 2035.
26

Nothing in this subsection precludes de minimis exposure

HB3961
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LRB104 12439 RPS 22758 b
1

of any funds held by a pension system in the assets or
2

obligations described in this Section.
3

(3) In the period before divestment pursuant to
4

paragraphs (1) and (2), the pension system may sign
5

engagement letters or participate in shareholder
6

resolutions seeking an agreed-upon divestment of fossil
7

fuels from the pension system's holdings.
8

(4) Nothing in this Section precludes or limits the
9

exercise of shareholder engagement or proxy voting rights
10

as guaranteed by a pension system's de minimis holdings
11

following the pension system's divestment obligations
12

pursuant to this Section.
13

(e) Each board of trustees of a pension system that has
14
adopted a written investment policy under Section 1-113.6
15
shall adopt an update of its written investment policy, if
16
necessary, to meet the requirements of this Section. A copy of
17
the updated policy shall be filed with the Department of
18
Insurance within 30 days after its adoption.
19

(f)(1) Each pension system shall disclose the analytic
20
methods used, if any, in determining the climate-related
21
financial risks posed by its fossil fuel investments (both
22
publicly traded and private investments) and the results of
23
such analysis, including the alignment of each pension system
24
with the Paris Climate Agreement and the climate policy goals
25
that are included in the Energy Transition Act.
26

(2) Each pension system shall report its

HB3961
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LRB104 12439 RPS 22758 b
1

climate-related shareholder engagement activities and
2

outcomes. For publicly traded investments, the report must
3

also include a description of additional action taken, or
4

to be taken, by the board to address climate-related
5

financial risk. The pension system's proxy voting
6

guidelines and climate-related voting record for the year
7

must also be included in the report. For private
8

investments, fund managers must identify all efforts
9

undertaken to decarbonize an existing investment and must
10

further identify all efforts that will be taken to prevent
11

fossil fuel exposure through future private investments.
12

(3) Beginning January 1, 2026 and annually thereafter,
13

each pension system shall issue a report reviewing its
14

environmental, social, and governance investment policy.
15

The report must disclose commonly available environmental
16

performance metrics on the environmental effects of the
17

pension system's investments.

18

Section 99.
Effective date.
This Act takes effect upon
19
becoming law.

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