Iowa

Title

Key Dates

Nature of
Action

ESG Category

Summary

Governor: Protecting State Investments from ESG Practices

Adopted and in effect
1/17/2023

Governor Position

Restrict Use of ESG Factors; Focus on Pecuniary Characteristics

■ On January 17, 2023, Republican Governor Kim Reynolds proposed the following actions to "[protect] state investments from ESG practices": 1) investment firms that manage the state's money must not boycott fossil fuel energy or firearms companies, or generally invest funds to further environmental, social, governance, political, or ideological interests over maximized returns; and 2) the state must scrutinize companies in which it invests public funds and divest from those that engage in ESG practices.

Target Entities that Boycott Certain Industries

Title

Key Dates

Nature of
Action

ESG Category

Summary

Introduced

■ The bill requires a fiduciary to vote all shares held directly or indirectly in the "best economic interest" of the plan participants and beneficiaries. It also prohibits a proxy advisory firm from providing proxy voting advice regarding shareholder proposals to an entity that the state regulates unless the advice is based solely on the best economic interests of the shareholders. “Best economic interest” means investment pursuant to the objective of maximizing risk-adjusted investment returns of the participants and beneficiaries of a plan over a time horizon consistent with the risk management profile of the plan. A fiduciary shall not vote in a manner that does any of the following: (i) subordinates the economic interest of the plan participants and beneficiaries to any ESG or ideological goal, or (ii) promotes any ESG or ideological goal unless based on economic analysis, it is determined that the vote is in the best economic interest of the participants and beneficiaries.

■ With respect to a shareholder proposal, there is a rebuttable presumption that a fiduciary votes its shares solely in the best economic interest of participants and beneficiaries if the fiduciary’s vote follows the recommendation of the board of directors of the issuer of the shares (as long as the board includes a majority of independent directors), or if the fiduciary or a third party conducts and documents an economic analysis showing that the vote is in the best economic interest of participants and beneficiaries.

■ The bill requires a fiduciary to annually report to the state treasurer any vote inconsistent with the recommendation of an issuer’s board of directors and the economic analysis on which the fiduciary relied. This report must be certified by the fiduciary’s CEO and CFO. The bill also requires a fiduciary to review its economic analysis every three years to ensure that the fiduciary’s models, procedures, and processes predict the best economic interest of the plan participants and beneficiaries.

■ The bill also permits an investor, beneficiary, or participant of a plan to submit a request for the economic analysis conducted for a fiduciary’s vote to the investment company that owns shares of an enterprise regulated by the state or the plan if the individual has reason to believe that shares of the plan have not been voted in the best economic interest of the plan participants and beneficiaries. The investment company or plan must respond in writing within 90 days by providing the requested economic analysis or informing the individual that no economic analysis was conducted or the vote aligned with the recommendation of the board of directors of the issuer of the shares. The investment company or plan must provide such a  response without cost up to twice annually per consumer.

Introduced

■ This bill relates to executive orders issued by the President of the U.S. The bill allows the legislative council to review an executive order issued by the President and not passed into law by the U.S. Congress. The legislative council may refer such orders to the state AG and Governor for further review. The bill requires the AG  to determine whether an order is constitutional and to decide whether to seek an exemption from the order or a ruling on its constitutionality.

SSB1094/507: A bill for an act concerning public contracts with companies that boycott certain companies or that engage in nonpecuniary social investment policies

Introduced in 2023, carried over to 2024

Legislation

Target Entities That Boycott Certain Industries

■ Restricts Iowa public funds and public entities from entering into a contract for investment or management services with "scrutinized companies" that have engaged in nonpecuniary social investment or a boycott of certain firearms- and fossil fuel-related companies on behalf of a public entity.

■ Requires public funds by March 1, 2024 to maintain a list of scrutinized companies and update such lists annually.

HF27: A bill for an act relating to executive orders of the president of the United States

Introduced in 2023, carried over to 2024

Legislation

Restrict Use of ESG Factors; Focus on Pecuniary Characteristics

■ Prohibits the state, a political subdivision of the state, or any other publicly funded organization from implementing an executive order issued by the U.S. president that restricts a person's rights or that the attorney general determines to be unconstitutional and that relates to, among other things, the regulation of the financial sector as it relates to ESG standards or the regulation of the constitutional right to bear arms.

Title

Key Dates

Nature of
Action

ESG Category

Summary