Concerning public contracts by public funds with companies that boycott certain companies or that engage in nonpecuniary social investment policies

This bill creates new Code chapter 12K, which restricts public funds, defined as the treasurer of state, the state board of regents, the Iowa public employees’ retirement system (IPERS), the public safety peace officers’ retirement system, the statewide fire and police retirement system, and the judicial retirement system from generally entering into a contract with certain companies engaged in nonpecuniary social investment or a boycott of certain companies. The bill defines “boycott of certain companies” as, without a reasonable business purpose or as otherwise required under Code chapters 12F, 12H, and 12J, to take any adverse action to penalize or limit business opportunities for companies engaging or doing business with fossil fuel-based energy, timber, mining, production agriculture, firearms, firearm parts, firearm accessories, or ammunition companies. “Nonpecuniary social investment” is defined to mean, except as otherwise provided in new Code chapter 12K in the bill and Code chapters 12F, 12H, and 12J, investment or commitment of public funds to further environmental, social, governance, political, or ideological interests without a reasonable business purpose. The bill also defines “scrutinized company” as any company that engages in nonpecuniary social investment on behalf of a public entity or a boycott of certain companies on behalf of a public entity.3 requires that a public fund shall not enter into a contract with a company to provide investment or management of securities services to the public fund so long as such company engages in nonpecuniary social investment or a boycott of certain companies on behalf of the public fund. If the public fund has a contract for investment services with a company subject to termination, the public fund shall proceed to terminate the contract with that company in six months, as applicable, so long as the company remains a scrutinized company. The bill provides that this requirement on public funds does not apply to a public fund acting on behalf of a participant directing investments in a retirement account. The bill further requires each public fund to prepare and make available to the public, and file with the general assembly, an annual report, beginning October 1, 2024, concerning actions taken by the public fund relative to the requirements of new Code chapter 12K in the previous fiscal year. The bill further provides that with respect to actions taken in compliance with the bill, including all good-faith determinations regarding companies as required, the public fund shall be immune from any liability and exempt from any conflicting statutory or common law obligations, including any such obligations in respect to choice of asset managers, investment funds, or investments for the public fund. In addition, the bill provides that the requirements of the bill shall not limit the ability of a public fund to terminate any contract of an investment manager or other vendor in the exercise of the public fund’s fiduciary duties.9111.