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Anti-ESG bill clears finance panel with new $5.5 million price tag

A substantially amended bill cracking down on Indiana public pensions and outside investment managers on Tuesday cleared a key finance panel, with an expected new tax impact of $5.5 million over the next decade. That’s less than 0.1% of an earlier estimate of $6.7 billion, though Democrats still weren’t appeased.

House Bill 1008 seeks to prevent the Indiana Public Retirement System, the Indiana State Police Pension Trust and their publicly traded financial managers from making investment decisions based on government environmental, social or corporate or ESG policies. Funds should divest from offending firms unless it hurts retirees.

“These are policies that were invented by Wall Street who are trying to push the kind of environmental policies, social policies and ideological things that could never go through this legislature,” the bill’s author Rep. Ethan said Tuesday. Manning, R-Logansport. .

Manning said big asset management firms were “using their market power” to “push these policies on the private sector,” characterizing it as a “subversion of democracy.” He spoke before the House Ways and Means Committee, which must pass any bill with a financial impact.

“We have to reject these ideas and the available funds that we have to do are large amounts of pension funds. INPRS has about $45 billion,” Manning added.

The bill defines which stocks count as ESG investments, such as investor wariness of specific protected industries: firearms, fossil fuels and more. It also establishes enforcement mechanisms and proxy voting limits.

Bill backs away subtly

But to brush aside the earlier — and staggering — financial impact, Manning introduced a substantial amendment that strategically enacted the bill.

The bill originally imposed the same standards on outside financial managers as INPRS, applying to all businesses, even to business relationships unrelated to the state of Indiana.

Manning’s amendment exempted private equity managers from key provisions and specified that the bill applies only to what managers do “on behalf of assets managed for the public pension system.”

It also says that compliance means no additional obligations beyond those under a manager’s contract. However, companies should make a written commitment to follow the guidelines of the finance bill.

INPRS had previously feared that the bill would “effectively eliminate private market investment and all active investment managers,” which it noted typically do better than public market indexes. The changes have largely eased those concerns, according to an INPRS memo dated Feb. 15 but circulated to committee on Tuesday.

The amendment also specified that INPRS should only track proxy votes made by trustees – entities charged with responsibly managing pension funds on behalf of the state – rather than all proxy votes in general. INPRS typically has more than 200,000 of those votes, which are opportunities for shareholders to influence the management of an entity, each year.

The amendment also extended the entire framework, with some modifications, to the Indiana State Police Pension Trust. It wasn’t included before. INPRS does not manage that fund: its only trustee is the treasurer, who has already expressed his enthusiasm for the bill.

The pushback persists, but the bill passes

Manning said in committee the changes would make the projected $6.7 billion impact “disappear.”

Instead, INPRS estimated in its memo that the new version of the bill would cost $550,000 annually: about $200,000 for custom proxy voting policy and infrastructure, and $350,000 for more staff to manage the setup. of proxy voting. That amounts to $5.5 million over the original 10-year period.

Democrats were still not impressed.

In several lengthy exchanges, several Democratic lawmakers questioned and criticized Manning for the bill, suggesting that it was unnecessary, was administratively resource intensive, and could harm retirees.

Rep. Ed DeLaney, D-Indianapolis, unsuccessfully introduced an amendment that would have had INPRS calculate the returns it would have posted without the bill and would have made up the difference directly from the Indiana General Fund.

Rep. Ed Clere, R-New Albany, said he would be concerned about the “permanent” effect on that fund and wondered how INPRS would quantify the assumptions.

Another DeLaney amendment would allow people with defined contribution plans to withdraw their money from INPRS.

“The reason I want to do this is because – because I have a feeling this isn’t over, that this gun isn’t going to fire once in this attack?” DeLaney asked.

“Give people this opportunity, because I’m telling you: we are undermining the public’s trust in our plans and they should remove their money if they feel that way,” he added.

Republicans have repeatedly pushed back, arguing that the amended bill would have a relatively minor financial impact.

Manning also suggested the Indiana Bankers Association, which has opposed the bill in previous hearings, would support the new version, but the group told the Capital Chronicle it is still against it and that the banking sector would still be negatively impacted. .

The committee passed the bill 15 to 8, with all Democrats present voting against it. Clere also voted no.



Correction: This story has been updated due to inaccurate information provided on the tax impact of the latest invoice version.

INPRS_HB 1008 modified Tax Impact

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