Indiana’s top government leaders said this week they are concerned about the potential multibillion-dollar impact of a public pension bill intended to crack down on the environmental, social and governmental investment strategy known as ESG.
And senators are pointing to their less-stringent alternative as House lawmakers scramble to “tighten it up.”
“Intent, and where that potentially collides with reality, is always of concern to me,” Republican Gov. Eric Holcomb told reporters Tuesday. “And we don’t want to do anything that risks—anything that responsibly risks—our pension or what retirees expect.”
House Bill 1008 would mandate that Indiana’s public pension system divest from investment firms or funds that use ESG investment criteria.
Author Rep. Ethan Manning, R-Logansport, and supporters say the proposal would ensure that the Indiana Public Retirement System puts finances first. But an updated fiscal analysis, first reported by the Capital Chronicle, revealed the measure could drop INPRS returns by a whopping $6.7 billion over the next decade.
That drop in returns would cut INPRS’ estimated annual return on investment from 6.25% to 5.05%, likely forcing the state and local units of government to pay more toward pensions in exchange, according to the analysis.
It could also prevent INPRS from running a specific pension fund it’s statutorily required to offer, and could cost an additional $550,000 in administrative costs per year, paid out from the funds.
Holcomb said he’d continue to “track this bill” and “share … our concerns along the way” with lawmakers.
But House Speaker Todd Huston, R-Fishers, defended the bill, telling reporters Thursday that “businesses have a role to play, which is to run their businesses and not … be selective on when they wander into the political realm.”
“Policy should be decided by policymakers,” Huston concluded.
Senate points at alternative
Manning’s 12-page bill is significantly more detailed, such as listing protected industries, and restrictive than a one-page Senate version, which codifies a finances-first investment policy INPRS has already adopted internally.
A fiscal analysis for Senate Bill 292, in contrast, doesn’t note specific changes in state or local expenditures or revenues.
Asked if the Senate would go further in its bill, Senate President Pro Tem Rodric Bray said his caucus members “like the version that we’ve got,” adding, “we’re comfortable with that language.”
“We don’t really want a $6 billion impact—that might change our budgeting process a little bit—so we’ve been trying to avoid that,” Bray, R-Martinsville, told reporters Thursday.
Author Sen. Travis Holdman, R-Markle, also advocated for his bill.
“Mine doesn’t have a fiscal [impact] that I’m aware of,” Holdman told the Capital Chronicle. “So, hopefully, the Senate bill will move and I will send it over there, and see what [House lawmakers] do with it.”
That bill passed out of committee Jan. 26 along party lines, but Holdman hasn’t yet called it down for second reading, the next step in the legislative process.
Top Senate Democrat Greg Taylor, however, pushed back against the anti-ESG concept in both bill versions.
“I don’t want to be explaining to my constituents that work for state government that they lost investment returns on their retirement because I didn’t agree to public policy of a company that we invested in,” Taylor told reporters Thursday. “So I hope my colleagues feel the same way.”
House defends bill, prepares changes
Bills with fiscal impacts get routed through the House Ways and Means Committee after initial committee passage. The House version of the bill, after passing out of committee 9-4, along party lines, was set to be heard Wednesday.
Instead, it was pulled from the agenda.
“It sounds like it’s running into trouble and it’s been bouncing around Ways and Means, excuse me, then off the calendar,” House Minority Leader Phil GiaQuinta, D-Fort Wayne, observed in comments to reporters Thursday.
Huston, the chamber’s top Republican, said that lawmakers were putting together some changes.
“Rep. Manning and our team are working with INPRS, and we’ll find a right landing spot—you’re going to see that bill next week,” Huston said. “… We’re going to get that bill across the finish line.”
Huston said those changes would not reduce the bill down to a bare-bones Senate look-alike.
“I think we can provide some clarity to ours [that] keeps the kind of the accountability that we want in it, but again, assuages some of the concerns that we’ve heard,” he said.
GiaQuinta was doubtful tweaks could help.
“I’m not sure what kind of amendments are actually going to help lower this $6 billion to $7 billion loss that they’re looking at, but we’ll see,” he said.
The Indiana Capital Chronicle is an independent, not-for-profit news organization that covers state government, policy and elections.
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Soooo… This is an idealogically-driven bill against Indiana investing in ethics-driven companies? And the line in the sand is “Policy should be decided by policymakers (not their constituents)” ???
If this passes, then the INPRS will divest from local companies like Cummins, Lilly and Cook Medical – and this makes for a better Indiana because why?
House Speaker Todd Huston says that “businesses have a role to play, which is to run their businesses and not … be selective on when they wander into the political realm.”
Does Huston believe that “state government has a role to play, but that does not include being selective and prohibiting the investment in a one business that has a higher return-on-investment than a business that has a lower return-on-investment?
If Huston does NOT believe that, then he does not believe in the free market.
Our part-time, ideologically radical legislators should stop legislating things that they don’t understand. They want so badly to make a dubious and ill-informed political point that they’re willing to torpedo Hoosier retirement savings.
The House is so over their head on this issue.
ESG helps companies determine where and how they can improve the environmental and societal (both for employees and for society in general) footprint. ESG provides a common measuring stick that most major and many small and startup companies use. Legislators need to stop hamstringing companies and investors from doing what is now a common practice. Let the finance professionals determine what will give the best returns whether it is by ESG or otherwise. A replacement measurement stick for ESG, as possibly proposed by the Senate, only increases the cost to a company for complying with Indiana regulations; why would a business or investment film do that when they have 49 (or whatever number allow ESG investing) other states for which they do not need to do the extra work.
As I’ve said before, ESG is good, smart capitalism. What the legislators are attempting is anti-free-market and akin to–dare I say it–socialistic intervention in the market.
Todd Huston’s quote in this article is astoundingly dumb.
This anti-ESG bill doesn’t restrict from investing in any company. But that’s the point. ESG policy’s require investment in only those companies that score high enough on the social report card. All this bill says is profits come before social idealism. I would have liked to have seen the math on the 6.7-billion-dollar loss the article talks about. And as a side note, it is time for this governor to go.
The governor is the adult in the room, far more that Huston or Manning.
The anti-ESG bill in the House is just as stupid as a bill that would force only ESG investments.
The House bill would force is to get out of the funds that give us the best returns because they’re not ideologically pure enough. They’re getting the best returns and using ESG, it appears. Current state, if the funds we use stop getting good returns because of ESG, we will vote with our feet and drop them.
The Senate bill – “ignore ESG, invest in what gets the best returns – is the proper response. That it’s already the policy of the state of Indiana …it’s a bill that does nothing, but at least it does no harm.