Concerning public contracts 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, and public entities, defined to include a public fund and the state and political subdivisions of the state, 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 this 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. Concerning public funds, the bill requires each public fund to develop and maintain a list of scrutinized companies that the public fund has entered into a contract with to provide investment or management of securities services for the public fund. Each public fund shall determine this list by March 1, 2024, and update it on an annual basis. Once a company is listed on the scrutinized companies list of a public fund, the bill requires the public fund to send a notice to that company relative to the requirements of the bill, to include notice that the company may qualify for termination of a contract for investment or management of securities services by the public fund.4 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 of a company on the public fund’s most recent scrutinized company list or of a company that would engage in nonpecuniary social investment or boycott of certain companies on behalf of the public fund. If the public fund has a contract for investment services with a scrutinized company, the public fund shall proceed to terminate the contract with that company in months, as applicable, so long as the company remains a scrutinized company. 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.6 provides that a public entity shall not enter into a contract of $1,000 or more with a scrutinized company included on a scrutinized company list for services to provide investment or management of securities services in which any public funds are invested. 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.