HF 4904

as introduced - 92nd Legislature (2021 - 2022) Posted on 05/23/2022 09:52am

A bill for an act
relating to state government; establishing the Energy Discrimination Elimination
Act; proposing coding for new law in Minnesota Statutes, chapter 216C.

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

Section 1.

[216C.021] ENERGY DISCRIMINATION ELIMINATION.

Subdivision 1.

Citation.

This section may be cited as the "Energy Discrimination
Elimination Act."

Subd. 2.

Findings.

The state of Minnesota finds that:

(1) fossil fuels currently supply more than 80 percent of the world's primary energy, and
the U.S. Energy Information Administration projects global consumption of fossil fuels will
increase steadily at least through 2050;

(2) restricting the supply of fossil fuels without an immediate substitute for those fuels
only serves to raise prices on energy consumers, profoundly impacting the poorest consumers;

(3) denying financing to American and European fossil energy producers, who are among
the most socially and environmentally responsible companies in the world, only serves to
support hostile nations and less responsible energy producers;

(4) banks are increasingly denying financing to creditworthy fossil energy companies
solely for the purpose of decarbonizing their lending portfolios and marketing their
environmental credentials to the detriment of potential returns for their shareholders;

(5) institutional investors are divesting from fossil energy companies and pressuring
corporations to commit to the goal of the Paris Agreement to reduce greenhouse gas emissions
to zero by 2050;

(6) large investment firms are colluding to force fossil energy companies to cannibalize
their existing businesses and direct time and attention away from increasing shareholder
returns;

(7) corporations are boycotting fossil energy companies by refusing to provide them
with products or services; and

(8) energy producing states, when financially prudent, should avoid doing business with
companies that are attacking the industries that substantially contribute to their state budgets.

Subd. 3.

Definitions.

(a) As used in this section, the following terms have the meanings
given.

(b) "Boycott energy company" means, without an ordinary business purpose, refusing
to deal with, terminating business activities with, or otherwise taking any action that is
intended to penalize, inflict economic harm on, or limit commercial relations with a company
because the company:

(1) engages in the exploration, production, utilization, transportation, sale, or
manufacturing of fossil-fuel-based energy and does not commit or pledge to meet
environmental standards beyond applicable federal and state law; or

(2) does business with a company described in this paragraph.

(c) "Company" means a for-profit sole proprietorship, organization, association,
corporation, partnership, joint venture, limited partnership, limited liability partnership, or
limited liability company, including a wholly owned subsidiary, majority-owned subsidiary,
parent company, or affiliate of those entities or business associations, that exists to make a
profit.

(d) "Commissioner" means the commissioner of commerce.

(e) "Direct holdings" means, with respect to a financial company, all securities of that
financial company held directly by a state governmental entity in an account or fund in
which a state governmental entity owns all shares or interests.

(f) "Financial company" means a publicly traded financial services, banking, or
investment company.

(g) "Indirect holdings" means, with respect to a financial company, all securities of that
financial company held in an account or fund, such as a mutual fund, managed by one or
more persons not employed by a state governmental entity, in which the state governmental
entity owns shares or interests together with other investors not subject to the provisions of
this section. Indirect holdings does not include money invested under a plan described by
section 401(k) or 457 of the Internal Revenue Code of 1986.

(h) "Listed financial company" means a financial company listed by the commissioner.

(i) "State governmental entity" means a list of state pensions to which the law is designed
to apply as determined by the commissioner of commerce.

Subd. 4.

Prohibition on discrimination.

Investment in financial companies that boycott
energy companies that engage in the exploration, production, utilization, transportation,
sale, or manufacture of fossil-fuel-based energy and do not commit or pledge to meet
environmental standards beyond applicable federal and state enacted laws is prohibited.

Subd. 5.

Other legal obligations.

With respect to actions taken in compliance with this
section, including all good faith determinations regarding financial companies as required
by this section, a state governmental entity and the commissioner of commerce are exempt
from any conflicting statutory or common law obligations, including any obligations with
respect to making investments, divesting from any investment, preparing or maintaining
any list of financial companies, or choosing asset managers, investment funds, or investments
for the state governmental entity's securities portfolios.

Subd. 6.

Indemnification of state governmental entities, employees, and others.

In
a cause of action based on an action, inaction, decision, divestment, investment, financial
company communication, report, or other determination made or taken in connection with
this section, the state shall indemnify and hold harmless for actual damages, court costs,
and attorney fees adjudged against, and defend state governmental entities, employees,
contractors, and other applicable entities to be indemnified as determined by the
commissioner.

Subd. 7.

No private cause of action.

(a) A person, including a member, retiree, or
beneficiary of a retirement system to which this section applies, an association, a research
firm, a financial company, or any other person may not sue or pursue a private cause of
action against the state, a governmental entity, employee, contractor, or other applicable
entity, as determined by the commissioner, for any claim or cause of action, including breach
of fiduciary duty, or for violation of any constitutional, statutory, or regulatory requirement
in connection with any action, inaction, decision, divestment, investment, financial company
communication, report, or other determination made or taken in connection with this section.

(b) A person who files suit against the state, a governmental entity, employee, contractor,
or other applicable entity as determined by the commissioner is liable for paying the costs
and attorney fees of a person sued in violation of this section.

Subd. 8.

Inapplicability of requirements inconsistent with fiduciary responsibilities
and related duties.

Notwithstanding any law to the contrary, a state governmental entity
is not subject to a requirement of this section if the state governmental entity determines
that the requirement would be inconsistent with its fiduciary responsibility with respect to
the investment of entity assets or other duties imposed by law relating to the investment of
entity assets.

Subd. 9.

Duties regarding investments; listed financial companies.

(a) The
commissioner shall prepare and maintain, and provide to each state governmental entity, a
list of all financial companies that boycott energy companies. In maintaining the list, the
commissioner may:

(1) review and rely, as appropriate in the commissioner's judgment, on publicly available
information regarding financial companies, including information provided by the state,
nonprofit organizations, research firms, international organizations, and governmental
entities; and

(2) request written verification from a financial company that it does not boycott energy
companies and rely, as appropriate in the commissioner's judgment and without conducting
further investigation, research, or inquiry, on a financial company's written response to the
request.

(b) A financial company that fails to provide to the commissioner a written verification
under paragraph (a), clause (2), before the 61st day after receiving the request from the
commissioner is presumed to be boycotting energy companies.

(c) The commissioner shall update the list annually or more often as the commissioner
considers necessary, but not more often than quarterly, based on information from, among
other sources, those listed in paragraph (a).

(d) No later than the 30th day after the date the list of financial companies that boycott
energy companies is first provided or updated, the commissioner shall file the list with the
speaker of the house and the president of the senate and the attorney general and post the
list on a publicly available website.

Subd. 10.

Identification of investment in listed financial companies.

No later than
the 30th day after the date a state governmental entity receives the list provided under
subdivision 9, paragraph (a), the state governmental entity shall notify the commissioner
of the listed financial companies in which the state governmental entity owns direct holdings
or indirect holdings.

Subd. 11.

Actions relating to listed financial company.

(a) For each listed financial
company identified under subdivision 10, the state governmental entity shall send a written
notice:

(1) informing the financial company of its status as a listed financial company;

(2) warning the financial company that it may become subject to divestment by state
governmental entities after the expiration of the period described by paragraph (b); and

(3) offering the financial company the opportunity to clarify its activities related to
companies described by subdivision 3, paragraph (b).

(b) No later than the 90th day after the date the financial company receives notice under
paragraph (a), the financial company must cease boycotting energy companies in order to
avoid qualifying for divestment by state governmental entities.

(c) If, during the time provided by paragraph (b), the financial company ceases boycotting
energy companies, the commissioner shall remove the financial company from the list
maintained under subdivision 3, paragraph (b), and this paragraph shall no longer apply to
the financial company unless it resumes boycotting energy companies.

(d) If, after the time provided by paragraph (b) expires, the financial company continues
to boycott energy companies, the state governmental entity shall sell, redeem, divest, or
withdraw all publicly traded securities of the financial company, except securities described
by subdivision 13, according to the schedule provided by subdivision 12.

Subd. 12.

Divestment of assets.

(a) A state governmental entity required to sell, redeem,
divest, or withdraw all publicly traded securities of a listed financial company shall comply
with the divestment schedule determined by the commissioner.

(b) If a financial company that ceased boycotting energy companies after receiving
notice under subdivision 11 resumes its boycott, the state governmental entity shall send a
written notice to the financial company informing it that the state governmental entity will
sell, redeem, divest, or withdraw all publicly traded securities of the financial company
according to the schedule in paragraph (a).

(c) Except as provided by paragraph (a), a state governmental entity may delay the
schedule for divestment under this subdivision only to the extent that the state governmental
entity determines, in the state governmental entity's good faith judgment, and consistent
with the entity's fiduciary duty, that divestment from listed financial companies will likely
result in a loss in value or a benchmark deviation described by subdivision 14, paragraph
(a).

(d) If a state governmental entity delays the schedule for divestment, the state
governmental entity shall submit a report to the speaker of the house and the president of
the senate and the attorney general stating the reasons and justification for the state
governmental entity's delay in divestment from listed financial companies. The report must
include documentation supporting the state governmental entity determination that the
divestment would result in a loss in value or a benchmark deviation described by subdivision
14, paragraph (a), including objective numerical estimates.

Subd. 13.

Investments exempted from divestment.

A state governmental entity is not
required to divest from any indirect holdings in actively or passively managed investment
funds or private equity funds. The state governmental entity shall submit letters to the
managers of each investment fund containing listed financial companies requesting that
they remove those financial companies from the fund or create a similar actively or passively
managed fund with indirect holdings devoid of listed financial companies. If a manager
creates a similar fund with substantially the same management fees and same level of
investment risk and anticipated return, the state governmental entity may replace all
applicable investments with investments in the similar fund in a time frame consistent with
prudent fiduciary standards but no later than the 450th day after the date the fund is created.

Subd. 14.

Authorized investment in listed financial companies.

(a) A state
governmental entity may cease divesting from one or more listed financial companies only
if clear and convincing evidence shows that:

(1) the state governmental entity has suffered or will suffer a loss in the hypothetical
value of all assets under management by the state governmental entity as a result of having
to divest from listed financial companies under this section; or

(2) an individual portfolio that uses a benchmark-aware strategy would be subject to an
aggregate expected deviation from its benchmark as a result of having to divest from listed
financial companies under this section.

(b) A state governmental entity may cease divesting from a listed financial company as
provided by this section only to the extent necessary to ensure that the state governmental
entity does not suffer a loss in value or deviate from its benchmark as described by paragraph
(a).

(c) Before a state governmental entity may cease divesting from a listed financial
company under this section, the state governmental entity must provide a written report to
the commissioner, the speaker of the house, the president of the senate, and the attorney
general setting forth the reason and justification, supported by clear and convincing evidence,
for deciding to cease divestment or to remain invested in a listed financial company.

(d) This section does not apply to reinvestment in a financial company that is no longer
a listed financial company.

Subd. 15.

Prohibited investments.

Except as provided by subdivision 14, a state
governmental entity may not acquire securities of a listed financial company.

Subd. 16.

Report and enforcement.

No later than December 15 of each year, each state
governmental entity shall file a publicly available report with the speaker of the house, the
president of the senate, and the attorney general that:

(1) identifies all securities sold, redeemed, divested, or withdrawn in compliance with
subdivision 12;

(2) identifies all prohibited investments under subdivision 15; and

(3) summarizes any changes made under subdivision 13.

Subd. 17.

Enforcement.

The attorney general may bring any action necessary to enforce
this section.

EFFECTIVE DATE.

This section is effective the day following final enactment.

Sec. 2.

[216C.022] PROHIBITION ON CONTRACTS WITH COMPANIES
BOYCOTTING CERTAIN ENERGY COMPANIES.

Subdivision 1.

Definitions.

(a) As used in this section, the following terms have the
meanings given.

(b) "Boycott energy company" has the meaning given in section 216C.021, subdivision
3, paragraph (b).

(c) "Company" has the meaning given in section 216C.021, subdivision 3, paragraph
(c), except that company does not include a sole proprietorship.

(d) "Governmental entity" means a state agency or political subdivision of this state.

Subd. 2.

Provision required in contract.

(a) This section applies only to a contract that:

(1) is between a governmental entity and a company with ten or more full-time employees;
and

(2) has a value of $50,000 or more that is to be paid wholly or partly from public funds
of the governmental entity.

(b) Except as provided by paragraph (c), a governmental entity may not enter into a
contract with a company for goods or services unless the contract contains a written
verification from the company that the company:

(1) does not boycott energy companies; and

(2) shall not boycott energy companies during the term of the contract.

(c) Paragraph (b) does not apply to a governmental entity that determines the requirements
of paragraph (b) are inconsistent with the governmental entity's constitutional or statutory
duties related to the issuance, incurrence, or management of debt obligations or the deposit,
custody, management, borrowing, or investment of funds.

EFFECTIVE DATE.

This section is effective for applicable contracts entered into by
a governmental entity on or after December 15, 2022.