Committee affirms anti-ESG, anti-China pension investing bills

By: - January 26, 2023 6:30 am

(Getty Images)

Indiana senators on Wednesday said the state’s pension system should prioritize return on investment in one bill — not environmental and social concerns — even as they advanced another bill requiring the system to divest from China-related investments.

Sen. Chris Garten, R-Charlestown, introduces a bill mandating Indiana’s pension system divest from its China-related holdings on Wednesday, Jan. 25, 2023. (Leslie Bonilla Muñiz/Indiana Capital Chronicle)

Senate Bill 292 would require the Indiana Public Retirement System to make investment decisions for its 500,000 members primarily to maximize the rate of return, not to influence any environmental, social or governmental policies — known as “ESG” investing.

But Senate Bill 268 would force the system to divest from its China-related holdings, saying that such investments “risk” Hoosiers’ “security and welfare.”

The two bills directly conflicted with each other — and existing divestment requirements — until the Senate Pensions and Labor Committee on Wednesday added an exception to the ESG ban.

A no-ESG reminder

Author Sen. Travis Holdman, R-Markle, told the committee his ESG ban wasn’t intended to “tie the hands of the INPRS investors,” but rather ensure that they “do not make decisions based upon environmental and social, or governance standards.”

INPRS Deputy Executive Director Tony Green told the committee that the system does currently prioritize high returns and low risks over ESG considerations.

“This is just codifying what our investment policy statement says,” Green said.

State law also already requires that INPRS invest and manage assets “solely in the interest of the beneficiaries,” as Indiana Attorney Todd Rokita noted in a September advisory opinion.

Democrats criticized the bill as unnecessary, even as they asked why it didn’t apply to other state entities that invest public dollars, like the treasurer or the Indiana Finance Authority.

The committee approved the bill 7-2, along party lines. Similar legislation is moving around the nation.

Divesting from China?

State law bars INPRS from investing in entities:

  • Doing business in Sudan, because of genocide in the Darfur region
  • Doing business in countries the federal government has designated state sponsors of terrorism
  • That have boycotted, divested from or sanctioned Israel

INPRS also already follows three state-level divestment laws, plus several federal measures — and Senate Bill 268 author Sen. Chris Garten, R-Charlestown, wants to add China to that list.

The system has more than $1 billion invested in China as of Wednesday, Garten told his fellow lawmakers. His bill would require INPRS to divest from 50% of any holding within three years of discovering a banned connection to China, 75% within four years, and 100% by five years.

“This is our business partner, right? [China is] engaged in multi-dimensional warfare with every Hoosier that’s vested in these funds,” Garten said, after running through several Federal Bureau of Investigation economic and security reports.

Rokita’s office, which has been highly critical of the country — even filing two lawsuits against China-based TikTok — was in favor.

“The Chinese Communist Party is not our friends. They’re a national security threat,” Policy Director and Legislative Counsel Corrine Youngs told lawmakers. “And they’re trying to supplant us on the world stage by weakening our economy, polluting the minds of our youth, and stealing our systems data and intellectual property.”

Garten also pulled from a recent United Nations report detailing the country’s ongoing genocide of the Uyghur ethnic group, including surveillance, forced sterilizations, forced labor and attempts to stamp out cultural, religious and language practices.

The bill was amended Wednesday to include specific federal and state criteria, which INPRS said it supported.

“We were trying to take that discretion from our board away, because we don’t have subject matter expertise,” Green said. Instead, INPRS can use the state and federal criteria to compile a “list that we execute.”

The Indiana House also has similar legislation it is hearing Thursday. 

INPRS said divesting from China would have little long-term impact, but could increase the volatility of its portfolio.

“The focus of this bill should not be on divestment or divestment costs,” Garten said, “as much as the focus should be on: will we continue to invest in sponsoring of human rights violations and further invest in our largest adversary?”

The committee approved the bill unanimously, although Sen. Andrea Hunley, D-Indianapolis, said lawmakers should “be really cautious about how we talk about this back in our communities” to avoid generating anti-Asian racism.

INPRS previously lost at least $200 million in the fallout from Russia’s invasion of Ukraine. The value of some investments dropped as those economies crashed, and the system was locked into other investments that a system leader said were now “worthless.”

“Hopefully, our managers can salvage at least some of these assets,” he told lawmakers at the time.

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Leslie Bonilla Muñiz
Leslie Bonilla Muñiz

Leslie covers state government for the Indiana Capital Chronicle with emphases on elections, infrastructure and transportation. She previously covered city-county government for the Indianapolis Business Journal. She has also reported on local, national and international news for the Chicago Tribune, Voice of America and more. She holds an undergraduate degree in journalism from Northwestern University.

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