Analysis: Anti-ESG pension bill could shrink state pension returns $6.7B in next decade

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A bill mandating that Indiana’s public pension system divest from firms or funds that use certain non-financial investment criteria—a flashpoint in the state’s culture wars—could slash the system’s returns by nearly $7 billion over the next decade, according to a revised fiscal report by the Legislative Services Agency Office of Fiscal and Management Analysis.

Bill author Rep. Ethan Manning, R-Logansport, and supporters say the proposal would ensure that the Indiana Public Retirement System, or INPRS, puts finances first. House Bill 1008 is part of a GOP effort to crack down on the environmental, social and governmental framework known as ESG investing.

But its restrictions and administrative requirements could mean a hefty price tag for the fund and its retirees.

And the conservative-leaning Indiana Chamber of Commerce reinforced its opposition in a tweet: “Safe to say we still oppose H.B. 1008. We’ll continue to voice our strong opposition to House members as well as key senators, who may receive the bill the second half of session.”

INPRS itself has been more measured in its responses, and Manning said he expects changes.

Returns down?

An updated fiscal analysis for the legislation shows that over the next decade, the bill, if enacted, could reduce investment returns on defined-benefit funds by $6.4 billion and defined-contribution funds by $300 million.

That drop in returns would cut INPRS’ estimated annual return on investment from 6.25% to 5.05%. Indiana and communities with current and former employees in defined-benefit funds would likely pay higher contributions beginning in 2025, according to the analysis.

The bill orders INPRS and its many external investment managers to stick to financial criteria in decision-making and avoid using ESG criteria. It defines ESG as pursuing a reduction in greenhouse gas emissions, assessing corporate boards or other aspects of governance and divesting from companies in a list of protected industries.

Those industries are firearms manufacturing and related services; oil, gas, lumber, mining, agriculture and meat production-related businesses; and companies that contract with U.S. Immigration and Customs Enforcement. Firms that boycott those industries—regardless of how they handle INPRS’ investments—could find themselves subject to a mandatory reverse-boycott from INPRS.

And the bill outlines a process for enforcement, headed by Republican State Treasurer Daniel Elliott.

At the end of that process, INPRS would have to divest from firms and funds violating the bill unless its board were to decide that such action would not be in the best economic interest of its members. Then, the board would have to make its rationale public.

Other effects

HB 1008’s specific definitions, requirements and enforcement mechanisms could have other consequences.

“The bill may effectively prohibit investment in private markets [like private equity] as well as the use of active public managers,” the new analysis says.

Without those managers, it adds, INPRS wouldn’t be able to run a stable value fund for defined-contribution accounts—which it’s currently required to offer under Indiana Code.

The bill also tasks INPRS with tracking and reporting all of its proxy votes: typically more than 200,000, annually. The votes are an opportunity for shareholders to influence an entity’s management.

That requirement could cost an additional $550,000 in administrative costs per year, paid out from the funds: $200,000 for custom proxy voting policy and infrastructure and $350,000 to hire additional investment staff to manage proxy voting.

The bill would also mean more work, more employees and thus more spending for the agencies involved, which include INPRS, the Treasurer of State, the Auditor of State and the Indiana State Police.


After the Capital Chronicle reported the updated analysis, some Democrats called for the bill’s withdrawal from consideration.

“Under both Democratic and Republican leadership, the General Assembly has worked for years to fully fund all our pensions,” Rep. Ed DeLaney, D-Indianapolis, said in a statement Monday. “This has required us to be open to a broad range of investments based on their likely return and safety. The present Republican super-majority wants to replace this successful and open strategy with an effort to favor a few industries they like, such as coal.”

“Our taxpayers and retirees will have to absorb this cost. We owe them better,” DeLaney added. “The super-majority should withdraw this bill and let our pensioners and taxpayers rest easy.”

Manning indicated there could be changes to “address” the projected costs.

“We’ll continue to work on the bill to address this issue, and I expect there will be further amendments as the bill moves along in the process,” he said through a spokesperson Monday afternoon.

INPRS itself was neutral before the analysis’ release. Asked about its position on Monday, the agency said in an email that the system invests “for the sole and exclusive benefit [of] its members and beneficiaries” and “does not consider ESG factors” when investing.

“INPRS is sympathetic to the impact that ESG is having on certain Indiana businesses and individuals,” a spokesman wrote, seemingly in response to testimony from gun manufacturers and coal companies last week. “INPRS will continue to engage with the Indiana General Assembly on any financial impacts created by H.B. 1008 and work toward a solution.”

The House Committee on Financial Institutions passed the bill last week 9-4, along party lines. It next goes to the Ways and Means Committee because of its financial impact.

The Indiana Capital Chronicle is an independent, not-for-profit news organization that covers state government, policy and elections.

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22 thoughts on “Analysis: Anti-ESG pension bill could shrink state pension returns $6.7B in next decade

  1. In a world of extremes, the alternative to ESG investing is to invest in old and inherently more likely to die industries. It’s almost extending socially conservative values to ever-progressing markets is not very fiscally conservative.

    The lawmakers who are trying to paint anti-ESG bills as weapons for “the culture war” are probably just trying to protect dying industries. Protectionism is one of the things that breaks capitalism. Meanwhile, when investors make investments based on their values, it bolsters capitalism. For a very long time, new investors have been receiving encouragement to invest based on their values. ESGs hedge some of the risk of individual-stock-based values investing.

    If someone really wanted to, they could start a fund that invests in dying industries & convince pensions to hop on in. I imagine he/she would be subjected to a riot after everybody loses their money.

    1. Petrochemicals is not a dying industry. It supplies 90% of the world’s transportation energy and 80% of the world’s total energy it.

      Frankly, it’s completely irrational to call it a dying industry when it’s responsible for the thriving life we have on Earth right now.

    1. Bernie, even the Chamber of Commerce knows what you claim is not true. Read the article again (or maybe even for the first time) and let the facts sink in…

    2. Brent, energy company valuations are currently extremely high with high dividends.

      ESG funds are avoiding investing in energy companies.

    3. The “former Republican” Brent, who now agrees with the globalist mafioso underpinings of ESG, completely ignores the collapsing fortunes of Hollywood (Disney) and Big Tech (Meta, Amazon) and Legacy Media (CNN, WaPo) and the motivations of investors like Our Dear Friend George, as well as the “non-profit” machinations of Klaus, and thinks that the fact that this has all happened organically. LOL. Somehow these companies keep cranking out woke junk that fails, yet they don’t go out of business. Weird.

      The Chamber of Commerce is just as compromised. So is IBJ. They’re terrified that if they step out of line, they’ll get treated the same way Papa John Schatter did a few years ago, thanks to the collusion between government, big business, and the catalyzing glue of investors and quangos. The US is so racist that everyone cowers at the fear of getting called a racist, to the point that they’ll stutter their way through being asked a deep metaphysical question: “What is a woman?” and half the country can’t answer. They’ll pretend that COVID causes myocarditis. They’ll claim that modern America is still enriched by slavery, even as it’s patently obvious that (just as it was in 1870) slavery literally held back economies.

      It’s pure Bezmenovian subversion using the tried and true tactics of the KGB under Stalin. But this time it’s not communism. Let us remember that during the 2020 to 2022 (and possibly continuing) farce of COVID, the greatest known scam in modern history, a group of left-wing globalists harnessed the global economy to extract from small businesses and the middle class and enrich the folks already at the tippy-top. Sure COVID existed. It’s not make believe. But it’s been obvious to the wrong half of the country since May 2020 that it was hyperbolized for slimy political and corporatists gains.

      Nope, the ESG end-state is racial Marxism for rich countries. After all, there’s still the illusion of a “free market” as there was under a certain mustachioed Austrian painter. Most Germans in the 1930s became Nazis and thought they were being good people. No different among the Wokies today. Paved with good intentions.

    4. Lauren … again, what’s the alternative you espouse?

      All of the bomb throwers – the MTG’s, the Boebert’s, the Jim’s of Banks and Jordan, the Bannon’s – are really good at insulting everyone else and tearing down and blaming everyone else for being … really poor at the actual art of governance and getting things done.

      “Everything stinks, vote for me and give me money, I hate the same people you do.”

      Nice pyramid scheme, just like crypto, come to think of it.

  2. But…but…don’t you know that a 31-year old state legislator knows more about investing than, well, everybody else?

    To all the pensioners who worked for the state of Indiana, when their retirement prospects grow dim because the pension fund isn’t getting the ROIs it could and should have been getting, remember the name Ethan Manning (as well as his fellow Republicans who bought into this anti-ESG nonsense).

    Question: when will the grown-ups show up and take control of these serious matters?

  3. The “Prudent Man” standard for trustees has been the time tested method for investment decisions by those involved with other peoples’ savings. Limiting that standard either pro-ESG or anti-ESG will cause eventual shortfalls. Investing carries risk. Diversification spreads the risk that a particular sector of investment may turn out poorly. While there are many economic forecast models available, at best, there is risk. Adding ESG rules in either direction complicates the investing process, and limits what might be good choices for investment.

    1. +1.

      This is costing other states with higher borrowing costs and lower investment returns. Why we would repeat their mistakes is beyond me … unless we’ve decided that police and fire pensions should be killed off anyway.

  4. Time has told the Leftist and Liberal claims that there will be a financial bust for all if we don’t think and do as they do as they try to manipulate and take control of our economic systems have proven false all the time.
    People won’t and don’t invest or put their money into things that protest or vie against their beliefs and who they are.
    News flash for the spin doctors on the Left…
    Conservatives and people from all walks of life and make money in the market and economic positive impacts without financially supporting the Left’s stealth taxation agendas and implements.

    1. I’d bet my entire net worth that you either do t have retirement savings or don’t actually know where they are invested….

      Trailing 10 years says that if you invest aligned with the above you’ve left almost 60% growth on the table!

    2. JJ, if you avoid investing in energy companies that run the world, you’re missing out on some great reliable dividends.

    3. You are also missing out on the risk that energy companies are held more responsible for governments around the world for the pollution that they might create.

      To blindly invest in energy companies and not account for that … also doesn’t seem wise.

  5. They think of conservatives the same way white southerners treated black people in the 1960s. So culturally, intellectually, and morally inferior that rigging elections against them is actually the RIGHT thing to do.

    Same political party too! And, when you and I make these allegations, they’re response is “well the parties switched sides!” LOL.

    So does that mean, since the parties had switched sides sometime after Nixon’s Southern Strategy (when the south became both less influenced by white nationalist groups like the KKK and also less Democrat), that the New Deal under FDR was actually a right-wing conservative scheme? Since FDR and Truman were Democrats and the Dems were somehow “right-wing” back them?

    The Dems have always forged partnerships with non-progressive subgroups. White southerners in the 1950s and 60s, religious blacks in the 1980s to the present (but rapidly eroding), Hispanic Catholics in the 1990s to the present (but even more rapidly eroding), and Islamists for the last 20 years. But somehow they only become “bad” when they abandon the Democratic party, as the white (and increasingly the non-white) working class have.

    And, since I remain independent, the Republicans have sat around uselessly wringing their hands the whole time. They did it in the 1960s during Dixiecrat Jim Crow (didn’t want to seem TOO in favor of Civil Rights!) and the neo-cons are doing it now, preferring to align with corporate Dems because both of them get their bread buttered from the same knife.

  6. I must be missing something in all of this rending of garments and gnashing of teeth – why not let individual investors decide by offering both woke and anti-woke investment portfolios? Isn’t that pro-free market? If it matters to you, let it drive your investing decisions and if it doesn’t, don’t. I used to invest in tobacco for dividends but made the decision some years ago that personally I didn’t want to endorse an industry that is, in my own personal opinion, harmful to our society. And isn’t this a ban and a regulation? I thought the partisans on the right were all anti-ban and keep the government out of my investment decisions and reducing regulation?

    1. Oh, don’t try and use logic – the right wing can’t grasp that. Keep government out of our lives….oh, wait…

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