2023 -- H 5811

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LC001937

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2023

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A N   A C T

RELATING TO PUBLIC FINANCE - DIVESTMENT OF STATE PENSION FUNDS FROM

MILITARY CONTRACTORS

     

     Introduced By: Representatives Stewart, Potter, Morales, Tanzi, Sanchez, and Henries

     Date Introduced: February 22, 2023

     Referred To: House Finance

     It is enacted by the General Assembly as follows:

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     SECTION 1. Title 35 of the General Laws entitled "PUBLIC FINANCE" is hereby

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amended by adding thereto the following chapter:

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CHAPTER 10.4

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DIVESTMENT OF STATE PENSION FUNDS FROM MILITARY CONTRACTORS

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     35-10.4-1. Short title.

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     This chapter shall be known and may be cited as the "Divestment of State Pension Funds

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from Military Contractors Act".

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     35-10.4-2. Definitions.

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     As used in this chapter, the following words and terms shall have the following meanings

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unless the context shall clearly indicate another or different meaning or intent:

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     (1) "Commission" means the state investment commission that oversees the assets of the

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employees' retirement system of Rhode Island pursuant to chapter 10 of title 35.

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     (2) "Company" means a sole proprietorship, organization, association, corporation,

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partnership, joint venture, limited partnership, limited liability partnership, limited liability

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company or other entity or business association, including all wholly-owned subsidiaries, majority-

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owned subsidiaries, parent companies or affiliates of such entities or business associations that exist

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for profit-making purposes.

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     (3) "Direct holdings" means all securities of a company held directly by the public fund or

 

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in an account or fund in which the public fund owns all shares or interests.

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     (4) "Indirect holdings" means all securities of a company held in an account or fund, such

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as a mutual fund or hedge fund managed by one or more person not employed by the public fund,

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in which the public fund owns shares or interests together with other investors not subject to this

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chapter.

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     (5) "Military contractors" or "military weapon manufacturers" means arms producing

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companies, defense contractors or military industries that primarily produce, maintain and store

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weapons for the armed forces of nation states or non-state entities. Products include guns,

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ammunition, missiles, military aircraft, military vehicles, and military ships.

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     (6) "Pension fund" means the pooled investment fund consisting of the assets of the state

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employees' and teachers' retirement systems, as well as the assets of local retirement systems under

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the control of the state.

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     35-10.4-3. Identification of military weapon manufacturers.

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     Within six (6) months of enactment of this chapter, the commission shall identify all

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military weapon manufacturers where the pension fund owns direct or indirect holdings and shall

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file a list of any such holdings with the office of attorney general, the house of representatives and

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the senate.

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     35-10.4-4. Policy of the commission.

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     It shall be the settled policy of the commission and the pension fund not to invest in any

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military weapons manufacturers. Within fourteen (14) months of enactment, the commission shall

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sell, redeem, divest or withdraw all publicly-traded and non-publicly traded securities of each

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company identified pursuant to § 35-10.4-3. This section shall not apply to indirect holdings in

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actively managed investment funds; provided, however, that the public fund shall submit letters to

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the managers of any such investment funds that contain companies identified in § 35-10.4-3,

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requesting that they remove such companies from the investment fund or create a similar actively

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managed fund with indirect holdings devoid of such companies.

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     35-10.4-5. Actions taken in compliance.

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     With respect to actions taken in compliance with this chapter, the commission and the

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pension fund shall be exempt from any conflicting statutory or common law obligation, including

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any such obligations with respect to choice of asset managers, investment funds, or investments for

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the public fund's securities portfolios and all good faith determinations regarding the identification

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of military weapons manufacturers subject to divestment pursuant to this chapter.

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     35-10.4-6. Exceptions.

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     Pursuant to § 35-10.4-3, the commission may cease divesting from identified companies,

 

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reinvest in identified companies, and continue to invest in identified companies from which it has

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not yet divested, upon clear and convincing evidence showing that the value for all assets under

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management by the commission becomes equal to or less than ninety-eight and five tenths percent

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(98.5%) one hundred fifty (150) basis points of the hypothetical value of all pension fund assets

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under management by the commission provided no divestment for any company had occurred

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under this chapter. Cessation of divestment, reinvestment or any subsequent ongoing investment

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authorized by this section shall be strictly limited to the minimum steps necessary to avoid the

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contingency set forth in this section. In advance of any cessation of divestment authorized by this

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chapter, the commission shall provide an annual written report to the office of the attorney general,

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the house of representatives, and the senate, setting forth the reasons and justifications, supported

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by clear and convincing evidence, for its decisions to cease divestment, to reinvest or to remain

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invested in companies identified in § 35-10.4-3.

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     35-10.4-7. Indemnification.

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     Present, future and former members of the state investment commission, jointly and

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individually, as well as state officers, employees and investment managers under contract with the

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commission shall be indemnified from the state general fund and held harmless by the state from

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all claims, demands, suits, actions, damages, judgments, costs, charges and expenses, including

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court costs and attorneys' fees, and against all liability, losses, and damages that these present,

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future, or former board members, officers, employees, or contract investment managers may at any

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time sustain by reason of any decision to restrict, reduce, or eliminate investments in military

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contractors.

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     35-10.4-8. Annual report.

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     The commission shall file an annual report with the office of the attorney general, the house

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of representatives, and the senate including:

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     (1) All investments sold, redeemed, divested or withdrawn in compliance with this chapter

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within the preceding year; and

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     (2) All investments prohibited by this chapter from which the public fund has not yet

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divested.

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     35-10.4-9. Severability.

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     If any clause, sentence, paragraph, section, or part of this chapter shall be adjudged by any

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court of competent jurisdiction to be invalid, that judgment shall not affect, impair, or invalidate

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the remainder of the chapter but shall be confined in its operation to the clause, sentence, paragraph,

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section, or part directly involved in the controversy in which that judgment shall have been

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rendered.

 

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     SECTION 2. This act shall take effect upon passage.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO PUBLIC FINANCE - DIVESTMENT OF STATE PENSION FUNDS FROM

MILITARY CONTRACTORS

***

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     This act would require the state investment commission to identify and divest pension fund

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investments in military weapon manufacturers whether held directly and indirectly with certain

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exceptions and would also require the state investment commission to provide an annual written

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report to the attorney general, the house, and the senate.

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     This act would take effect upon passage.

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