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23LSO-0643
2023
STATE OF WYOMING
23LSO-0643
ENGROSSED
3.0
SENATE FILE NO. SF0172
Stop ESG-State funds fiduciary duty act.
Sponsored by: Senator(s) Biteman, Bouchard, Driskill, French, Hicks, Hutchings, Ide, Laursen, D, McKeown and Salazar and Representative(s) Haroldson, Jennings, Ottman, Pendergraft, Singh, Tarver and Ward
A BILL
for
AN ACT relating to the administration of government; specifying requirements for the hiring and retention of investment managers, trustees and fiduciaries who invest state funds as specified; specifying proxy voting requirements for investment managers, trustees and fiduciaries who invest state funds; providing definitions; making conforming amendments; specifying applicability; and providing for an effective date.
Be It Enacted by the Legislature of the State of Wyoming:
Section 1.
W.S. 9
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4
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722 is created to read:
9
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4
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722.
Investment of state funds; consideration of only financial purposes.
(a)
As used in this section:
(i)
"Fiduciary" means as defined by W.S. 9
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3
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434(a)(xi) and includes any investment trustee, manager or other person responsible for making investment decisions or investment policies concerning state funds;
(ii)
"Fiduciary commitment" means any evidence of a fiduciary's or trustee's purpose in managing the investment of state funds, including but not limited to any of the following in a fiduciary's capacity as a fiduciary or in a trustee's capacity as a trustee:
(A)
Advertising, statements, explanations, reports, letters to clients, communications with portfolio companies, statements of principles or commitments; or
(B)
Participation in, affiliation with or status as a signatory to any coalition, initiative, joint statement of principles or agreement.
(iii)
"Financial" means having been prudently determined by a fiduciary or trustee to have a material effect on the financial risk or the financial return of an investment. "Financial" shall not include any action taken, or factor considered, by a fiduciary or trustee with any purpose whatsoever to further social, political or ideological interests. A fiduciary may reasonably be determined to have taken an action, or considered a factor, with a purpose to further social, political or ideological interests based upon evidence showing a fiduciary commitment to further, through portfolio company engagement, board or shareholder votes or other actions as a fiduciary or a trustee, any of the following actions beyond what state or federal law requires:
(A)
Eliminating, reducing, offsetting or disclosing greenhouse gas emissions;
(B)
Instituting or assessing corporate board or employment, composition, compensation or disclosure criteria that incorporates characteristics protected in this state as specified in W.S. 27
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9
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105(a)(i);
(C)
Divesting from, limiting investment in or limiting the activities or investments of any company for failing or not committing to meet environmental standards or disclosures;
(D)
Access to abortion, sex or gender changes or transgender surgery;
(E)
Divesting from, limiting investment in or limiting the activities of any company that engages in, facilitates or supports the manufacture, import, distribution, marketing, advertising, sale or lawful use of firearms, ammunition, components, parts or accessories of firearms or ammunition.
(iv)
"Investment entity" means the state treasurer, the state loan and investment board, the Wyoming retirement board, the Wyoming retirement system and any other entity responsible for the investment or management of the investment of state funds;
(v)
"State funds" means permanent funds as defined by W.S. 9
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714(a)(v), the retirement account established in W.S. 9
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407(a), any other funds invested by the Wyoming retirement system and any other funds invested by the state treasurer.
(b)
In making and supervising investments of state funds, each investment entity shall discharge its investment duties solely in the financial interest of the beneficiaries of the applicable state funds for the exclusive purposes of:
(i)
Providing financial benefits to the beneficiaries of the state funds;
(ii)
Defraying reasonable expenses of administering the investment of state funds;
(iii)
Meeting other purposes required by law and not related to the actions and considerations prohibited by this section.
(c)
Any person or fiduciary designated as a custodian of any state funds and any person or fiduciary retained to invest state funds shall be subject to the same fiduciary duties as an investment entity has under this section.
(d)
Each fiduciary shall take into account only financial factors when discharging its duties in investing state funds.
(e)
All shares of stock held directly or indirectly by or on behalf of an investment entity or on behalf of the investment entity's beneficiaries shall be voted solely in the financial interest of the beneficiaries.
(f)
Unless no economically practicable alternative is available:
(i)
The investment entity shall not grant proxy voting authority to any person who is not part of the investment entity or who is not employed by the investment entity, except that the investment entity may grant proxy voting authority to a person who has a practice of, and commits in writing to, follow guidelines that match the investment entity's obligation to act solely upon financial factors as required by this section;
(ii)
State funds shall not be entrusted to a fiduciary unless the fiduciary has a practice of, and commits in writing to, follow guidelines when engaging with portfolio companies and voting shares or proxies that match the investment entity's obligation to act solely upon financial factors as required by this section;
(iii)
No fiduciary shall adopt a practice of following the recommendations of a proxy advisor or other service provider unless the advisor or service provider has a practice of, and commits in writing to, following proxy voting guidelines that match the investment entity's obligation to act solely upon financial factors as required by this section.
(g)
Each investment entity may use not more than one (1) basis point from annual investment returns, with each invested fund's share calculated in proportion to the magnitude of aggregate investment earnings of each fund invested, including interest and dividends, for purposes of implementing the proxy voting requirements of subsection (f) of this section. Funds authorized under this subsection shall be continuously appropriated to the investment entity for use as authorized by this subsection.
(h)
The investment entity may terminate or not renew the contract of any fiduciary violating the provisions of this section.
Section 2
.
W.S. 9
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405(a)(v), 9
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408(b)(intro), 9
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436(a), 9
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440(a)(intro) and (b), 9
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714(a)(viii), 9
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715(a)(intro) and (b) and 9
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716(a)(intro) are amended to read:
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3
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405.
Retirement board duties and powers.
(a)
In addition to any other duties prescribed by law, the board shall:
(v)
Serve as investment trustee of the funds of the system
. In serving as investment trustee under this paragraph, the board shall comply with the requirements of W.S. 9
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722
;
9
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3
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408.
Designated custodian of retirement account; disbursements; investment of account monies.
(b)
The board, or its designee, which shall be registered under the Investment Advisor's Act of 1940 as amended, or any bank as defined in that act, upon written authority, shall invest monies in the retirement account, which investments shall not be considered disbursements for the purposes of W.S. 9
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214 and subsection (a) of this section. In investing and managing monies in the retirement account
and subject to the requirements of W.S. 9
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722
, the board, or its designee, shall exercise the judgment and care that a prudent investor would, in light of the purposes, terms, distribution requirements and all other circumstances surrounding the monies in the retirement account, including risk and return objectives established by the board which are reasonably suitable to the purpose of the Wyoming retirement system.
9
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3
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436.
Establishment of trust.
(a)
Except as otherwise provided in subsection (b) of this section, all assets of a retirement system are held in trust for the exclusive benefit of the members, retirees and beneficiaries of the system, including reasonable administrative expenses.
The trustee has the exclusive authority, subject to this act, to invest and manage those assets
, subject to the requirements of W.S. 9
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4
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722
.
9
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440.
Duties of trustee in investing and managing assets of retirement system.
(a)
In investing and managing assets of a retirement system pursuant to W.S. 9
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439
and subject to W.S. 9
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722
, a trustee with authority to invest and manage assets:
(b)
A trustee with authority to invest and manage assets of a retirement system shall adopt a statement of investment objectives and policies for each retirement program or appropriate grouping of programs
, subject to the requirements of W.S. 9
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722
. The statement shall include the desired rate of return on assets overall, the desired rates of return and acceptable levels of risk for each asset class, asset
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allocation goals, guidelines for the delegation of authority and information on the types of reports to be used to evaluate investment performance. At least annually, the trustee shall review the statement and change or reaffirm it.
9
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714.
Definitions.
(a)
As used in this act:
(viii)
"This act" means W.S. 9
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714 through
9
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721
9
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4
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722
.
9
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715.
Permissible investments.
(a)
The state treasurer, in consultation with the investment funds committee, shall employ a designated chief investment officer who shall have minimum qualifications including at least ten (10) years of experience managing institutional investment portfolios of in excess of five hundred million dollars ($500,000,000.00), experience with hiring and managing internal and external investment managers and extensive experience in any two (2) or more of the following areas: domestic equity, fixed income securities, international equity or alternative investments.
The designated chief investment officer shall provide the state treasurer with information and recommendations regarding the investment of state funds and additional information as requested by the state treasurer. The state treasurer shall compile an annual report which shall include investment, income, individual and aggregate gains and losses by fund and the extent to which the state investment policy is being implemented.
Subject to requirements of
W.S. 9
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722 and
subsection (c) of this section, state funds may be invested in any investment:
(b)
The state treasurer, or his designee, which shall be registered under the Investment Advisor's Act of 1940 as amended if required to be registered by the terms of that act as amended, may invest the permanent funds in equities, including stocks of corporations in accordance with subsections (a) through (e) of this section
,
and
W.S. 9
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716
and 9
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722
. The state treasurer shall report at least annually to the select committee on capital financing and investments, the joint appropriations committee and the investment funds committee on the analysis conducted pursuant to paragraph (d)(ii) of this section and W.S. 9
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716(b)(ix) and (e).
9
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716.
State investment policy; investment consultant.
(a)
The board, in consultation with the investment funds committee, shall adopt investment policy statements for state funds and shall review those policy statements at least annually. These policy statements shall be subject to
W.S. 9
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722 and to
the following:
Section 3.
Nothing in this act shall be construed to impair or otherwise modify any contract entered into before the effective date of this act.
Section 4
.
This act is effective July 1, 2023
.
(END)
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SF0172