SF 3384

as introduced - 92nd Legislature (2021 - 2022) Posted on 02/25/2022 09:24am

A bill for an act
relating to State Board of Investment; mandating report on impact of climate
change on fossil fuel investments currently held by State Board of Investment.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1. new text begin STATE BOARD OF INVESTMENT; REPORT ON RISKS OF
INVESTMENTS IN FOSSIL FUEL COMPANIES.
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new text begin Subdivision 1. new text end

new text begin Findings and purpose. new text end

new text begin The legislature finds and declares as follows:
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new text begin (a) Climate change is a long-term problem that will affect the state's environment, health,
and economy for decades to come.
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new text begin (b) Effects of global climate change are already occurring; sea ice has been lost, sea
levels are rising at accelerated rates, and extreme weather events are occurring with greater
duration and intensity.
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new text begin (c) As global temperatures continue to rise, these effects will likely accelerate leading
to greater intensity and frequency of devastating weather events.
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new text begin (d) The financial sector will be affected by the adverse effects of climate change.
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new text begin (e) Climate change presents an array of material financial risks, including transition risk,
physical risk, and litigation risk, that responsible investors must take into account when
making investment decisions. Failure to acknowledge and address these risks will result in
exposure to subsequent liabilities and financial risk.
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new text begin (f) If global temperature rise is to be limited to no more than two degrees Celsius,
governments must act to limit warming and hasten the transition to a low-carbon economy
by halting the extraction and development of carbon reserves. This regulatory risk will affect
major sectors of the global economy.
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new text begin (g) If climate change and carbon emissions continue on their current trajectories, both
acute and chronic weather-related activity will greatly compromise the ability of businesses
that do not account for these changes to reliably generate returns.
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new text begin (h) In the public pension investment context, these risks are especially salient. The State
Board of Investment has a fiduciary duty to retirement plan members, taxpayers, and the
state, to invest plan assets prudently. In order to meet this requirement and ensure sufficient
funding of both current and future retirees' benefits, the State Board of Investment must
consider both short-term and long-term effects of climate change and risks those effects
pose to retirement fund investments.
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new text begin (i) The purpose of the report required by subdivision 2 is to determine the capability of
the State Board of Investment to measure and respond to the growing financial risks posed
by global climate change and to assess risks to the assets of the public pension and retirement
funds due to global climate change.
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new text begin Subd. 2. new text end

new text begin Report required. new text end

new text begin (a) The State Board of Investment shall prepare a report on
the stability and security of investments in companies that are involved in the exploration
and extraction of fossil fuels. The report must be limited to assets of the public pension and
retirement funds managed by the State Board of Investment.
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new text begin (b) The report shall include the following:
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new text begin (1) a description of the fiduciary duties, prudent person standard, and other requirements
that govern the State Board of Investment's management of the retirement funds;
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new text begin (2) definitions of fossil fuel investments and renewable energy investments;
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new text begin (3) an assessment of the financial risks of continuing to stay invested in fossil fuel
companies, generally, and especially, continued investment in coal mining and producing
companies;
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new text begin (4) identification of already available assessments of alternatives to fossil fuel
investments, including investment in renewable energy companies and engagement in the
governance of those fossil fuel companies that are transitioning to become exclusively
renewable energy resource companies;
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new text begin (5) a summary of existing research on the processes, procedures, and policies utilized
by other public pension funds in the United States to address climate change issues;
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new text begin (6) a description of how climate change is currently addressed in the combined retirement
funds of the State Board of Investment;
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new text begin (7) identification of existing metrics to assess the impact of the carbon exposure of
individual companies and describe measures that would address potential adverse
consequences to the retirement funds of continued investment in companies holding a large
carbon footprint;
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new text begin (8) identification of improvements that could be incorporated into the State Board of
Investment's proxy guidelines regarding environmental policies that encourage further
engagement in climate change initiatives; and
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new text begin (9) identification of resources needed by the State Board of Investment to continue
acquiring knowledge on climate change risk and related investment alternatives.
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new text begin (c) The State Board of Investment shall deliver its report on or before February 1, 2023,
to the chair, the vice-chair, and the executive director of the Legislative Commission on
Pensions and Retirement.
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new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
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