Legislature approves bill targeting ESG investing
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Indiana is set to join at least seven other Republican-controlled states that have passed legislation targeting banks and investment firms that practice ESG investing, a type of investment strategy that considers the costs and risks associated with environmental, social or governance concerns.
House Bill 1008, authored by Rep. Ethan Manning, R-Logansport, directs the Indiana Public Retirement System board to refrain from making investments with the purpose of “influencing any social or environmental policy or attempting to influence the governance of any corporation for nonfinancial purposes.”
House lawmakers voted 69-27 along party lines Monday to concur with the Senate’s changes to the bill and advance it to the governor’s office.
The legislation mirrors national efforts by GOP leaders to punish large banks, investment firms and asset managers that have taken public stances on climate change, gun control and social issues, but the Indiana bill was significantly watered down after fiscal analysts concluded that it would have resulted in a $6.7 billion loss for retired public employees over the next decade.
That’s because the bill as previously written would “effectively prohibit investment in private markets [like private equity] as well as the use of active public managers,” according to a February fiscal analysis.
Lawmakers responded by tweaking the legislation to exclude private equity funds, which make up about 15% of the state’s total pension investments, the state police pension trust and INPRS’ defined contribution plans.
While the changes eased most critics’ concerns, the Indiana Chamber of Commerce remained opposed to HB 1008, arguing it “picks winners and losers” in the free market.
Groups representing gun manufacturers, fossil fuel companies and Hoosier farmers testified that the legislation was necessary given that some banks and credit card companies were refusing to work with their members due to ESG commitments.
During a House vote on the bill Monday, Democrats accused Republicans of inserting politics into investment decisions—the very thing they were accusing banks and investment firms of doing.
“This is based on a false premise that ESG investment factors are about politics or ideology,” said Rep. Carey Hamilton, an Indianapolis lawmaker who owned an environmental consulting firm prior to holding statewide elected office. “ESG is about ensuring strong investment returns. It’s not about politics. This bill is about politics.”
Enforcement of the bill is left to Republican State Treasurer Daniel Elliot, who will be tasked with publishing a list of investment managers who make ESG commitments.
The legislation is set to take effect July 1.
While INPRS has remained neutral on the bill, the state pension fund is also the only known pension system to contract with Strive Advisory LLC, an asset management company and anti-ESG firm whose former CEO is Vivek Ramaswamy, the conservative entrepreneur from Ohio who stepped down from that role to seek the GOP nomination for president.
The contract, which runs through June, acknowledges that Strive may be asked to advise INPRS on the same asset managers with which it competes, which raised concerns from a corporate watchdog group, the Indiana Capital Chronicle reported last month.