Panel OKs public portfolio bill
HB1307 aims to divest state investments in certain funds
A bill that would authorize the state treasurer to divest certain state investments because of the use of environmental, social justice or governance-related metrics zipped through the Arkansas House State Agencies and Governmental Affairs Committee on Wednesday.
In a voice vote, the House committee advanced House Bill 1307 by Rep. Jeff Wardlaw, R-Hermitage, to the full House in a hearing on the bill that lasted about two minutes.
Committee Chairman Dwight Tosh, R-Jonesboro, said no one signed up to testify for or against the bill. The bill has 61 House co-sponsors in the 100-member House.
Wardlaw said he has been working on the bill for almost a year and “we have met with most of the stakeholders involved in the bill [and] all have came to neutrality and agreement.
“Basically, this bill just says you can’t discriminate against the firearms industry, the ammunition industry or the fossil fuel industry in Arkansas [and] if you do we won’t put any state dollars into your business,” he told the House State Agencies and Governmental Affairs Committee.
Rep. Nicole Clowney, D-Fayetteville, said many other states, such as Kentucky and Texas, have enacted similar measures that have cost states billions of dollars in investments, so she asked whether Wardlaw has done a similar analysis on Arkansas investments and what he found.
In response, Wardlaw said that “we exempted the indirect holdings [in the bill], trying to avoid some of that major hit.
“We worked with our retirement folks to come to that conclusion, so I think we have minimized … that hit in Arkansas,” he said. “But we also want to make sure that we are following our beliefs in the state and … ensuring that nobody is discriminating against the industries that are important to Arkansas.”
Afterward, Arkansas Teacher Retirement System Executive Director Clint Rhoden said Wednesday the teacher retirement system’s investment portfolio is not static and may change daily as investment managers trade holdings to try and maximize results for ATRS participants.
“ATRS cannot comment on whether an investment in the ATRS portfolio will require divestment until an analysis is conducted on the portfolio at the time a list of prohibited financial services providers is established,” he
said in a written statement.
Arkansas Public Employees Retirement System Executive Director Amy Fecher said Wednesday that “the APERS Board of Trustees follows their obligation to their fiduciary duty to maximize invest returns for the benefit of its members.
“As we understand HB1307, we do not see any significant changes to our investment portfolio at this time,” she said in a written statement. “We appreciate the sponsors of HB1307 taking the retirement systems’ fiduciary concerns into consideration as they finalized the bill.”
Asked about what impact the bill would have on state retirement systems, state Treasurer Mark Lowery said Wednesday in a written statement, “My literal reading of HB1307, which has certainly been a moving target, shows me that retirement systems are still affected and includes direct or indirect investments.
“I await clarification on that so I will know fully what our office’s responsibilities will be in compiling the list,” the Republican state treasurer said.
As state treasurer, Lowery serves on the board of trustees for the teacher retirement system and public employees retirement system.
Wardlaw said Wednesday night in an interview that the bill exempts indirect holdings of the state’s retirement systems.
At the direction of the attorney general, the state treasurer would be required under HB1307 to prepare, maintain and provide to each state governmental entity a list of financial service providers that discriminate against energy companies or firearms entities or otherwise refuse to deal based on environmental, social justice and other governance-related factors, or ESG factors.
If the state treasurer, at the direction of the attorney general, determines that a financial services provider has ceased discriminating against energy companies or firearms entities or otherwise refusing to deal based on environmental, social justice and governance-related factors, the state treasurer would be required to remove the financial services provider from the list within 30 days under the bill.
The state treasurer would be required to post the list of financial services providers that discriminate against energy companies or firearms entities or otherwise refuse to deal based on environmental, social justice and other governance-related factors on the treasurer’s website under HB1307. Forty-five days before including a financial services provider on a list, the treasurer, at the direction of the attorney general, would be required to send a written notice to the financial services provider.
Under the bill, the state treasurer would be required to divest the state of all direct or indirect holdings with a financial services provider included on the list published on the state treasurer’s website for retirement holdings and all other holdings within certain periods.
A public entity that includes a state or local government entity would be required to divest itself of all direct or indirect holdings with a financial services provider included on the list published on the state treasurer’s website for retirement holdings and all other holdings with certain time periods under the bill.
Under SB1307, a state investment
shall be made in the sole interest of the beneficiary state taxpayer and the state treasurer’s evaluation shall be based only on pecuniary factors. In addition, a public entity shall not invest funds with a financial services provider listed on the estate treasurer’s website under the bill.
Republican Attorney General Tim Griffin said Wednesday in a written statement, “I appreciate Rep. Wardlaw and Sen. Hill for working to keep our state’s focus on investment return, not a progressive ESG agenda. I look forward to working with Treasurer Lowery to implement this important legislation.”
Sen. Ricky Hill, R-Cabot, is the Senate sponsor of HB1307. The bill has 23 Senate co-sponsors in the 35-member Senate.
“As I traveled the state for the last year, I heard the concerns of Arkansans about the negative creeping of cancel culture affecting our investments, and I believe that HB 1307 correctly addresses the frustration that Arkansans have about choosing winners and losers in investment decisions based on ideology rather than sound investment practices,” Lowery said in a written statement.
“Concerning the implementation of the legislation, I look forward to working with the Attorney General’s office — acting as my office’s attorney — and the Legislature in marshaling all necessary resources in compiling the list, defending the list, and completing the task that the Legislature has invoked in furthering sound and conservative financial practices to protect the resources of the people of Arkansas,” he said.