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January 29, 2024
2024 Legislation Bills to Watch
March 28, 2024

Oppose S.B. 5 in its Current Form

Bill Description Proposed by Senator Miguez: 

Proposes to define “financial” as having been prudently determined by a fiduciary to have a material effect on the financial risk or the financial return of an investment. Further defines “financial” as not including any action taken, or factor considered, by a fiduciary with any purpose whatsoever to further social, political, or ideological interests.

Proposes that 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 by engaging in what is defined in the proposed law as a “fiduciary commitment” (see definition below) to further, through portfolio company engagement, board or shareholder votes, or otherwise as a fiduciary, any of the following beyond what controlling federal or state law requires:

•       Eliminating, reducing, offsetting, or disclosing greenhouse gas emissions.

•       Instituting or assessing corporate board, or employment, composition, compensation, or disclosure criteria that incorporates characteristics protected in this state.

•       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.

•       Access to abortion, sex or gender change or transgender surgery.

•       Divesting from, limiting investment in, or limiting the activities or investments of, any company that engages in, facilitates, or supports the manufacture, import, distribution, marketing or advertising, sale, or lawful use of firearms, ammunition or components parts and accessories of firearms or ammunition.

 

Provides that anyone found to have breached these duties is liable for damages equal to three times all monies paid to the person or company by the system for that fiduciary’s services.

Proposes to define “financial” as having been prudently determined by a fiduciary to have a material effect on the financial risk or the financial return of an investment. Further defines “financial” as not including any action taken, or factor considered, by a fiduciary with any purpose whatsoever to further social, political, or ideological interests.

Proposes that 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 by engaging in what is defined in the proposed law as a “fiduciary commitment” (see definition below) to further, through portfolio company engagement, board or shareholder votes, or otherwise as a fiduciary, any of the following beyond what controlling federal or state law requires:

•       Eliminating, reducing, offsetting, or disclosing greenhouse gas emissions.

•       Instituting or assessing corporate board, or employment, composition, compensation, or disclosure criteria that incorporates characteristics protected in this state.

•       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.

•       Access to abortion, sex or gender change or transgender surgery.

•       Divesting from, limiting investment in, or limiting the activities or investments of, any company that engages in, facilitates, or supports the manufacture, import, distribution, marketing or advertising, sale, or lawful use of firearms, ammunition or components parts and accessories of firearms or ammunition.

Provides that anyone found to have breached these duties is liable for damages equal to three times all monies paid to the person or company by the system for that fiduciary’s services.

OPPOSE SENATE BILL 5 IN ITS CURRENT FORM

Passage of Senate Bill 5 would severely restrict retirement investments resulting in new debt, a drop in funding levels, and fewer COLAs for state retirement systems

 

Here are some basic points on why we need to oppose SB 5:

 

  • TRSL is the largest public retirement system in the state with more than $26 billion in assets.

 

  • As a large institutional investor, TRSL invests in many different types of assets—fixed income, US and international equities, alternative assets and real estate.

 

  • TRSL’s portfolio is highly, highly diversified and designed to include assets with specific characteristics that add value in good and challenging market conditions.

 

  • TRSL hires investment fund managers to invest on its behalf in these asset classes with the number one goal of maximizing returns and minimizing risk.

 

  • It is through these externally managed funds that TRSL can achieve portfolio diversification and optimal returns.

 

  • Each fund can contain investment in hundreds of companies—large and small, established or brand new.

 

  • However, Sen. Blake Miguez has filed a bill that would significantly affect how the TRSL Board can invest system assets.

 

  • Specifically, it restricts what companies TRSL could invest with and imposes penalties for individuals/companies responsible for making investment decisions on the system’s behalf, if prohibited investments are made.

 

  • In its current form, the bill could potentially close off TRSL’s investment in well-known and respected U.S. companies and/or limit the System’s access to certain fund managers.

 

  • As fiduciaries of the trust, TRSL board members, investment advisors, and executive management bear the responsibility of acting at all times in the best interests of the system and its members.

 

  • Constraining the ability of the board and its managers to invest in funds/companies they believe will yield beneficial investment returns is concerning.

 

  • It threatens to weaken the authority of the Board in its role as fiduciary and it could have adverse impacts on future investment earnings which pay monthly retirement benefits and cost-of-living adjustments.
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