By Anne Sherry, J.D.
A New Hampshire Senate committee voted last week to recommend against an anti-ESG bill. The bill would require a public retirement system fiduciary to “take into account only financial factors” and lists examples of ESG factors that would be considered non-financial. A House bill that would have made it a felony for a public pension fund to consider ESG factors was struck down by voice vote last week.
Senate bill. SB 520 would redefine the term “fiduciary” from the current definition modeled on the Internal Revenue Code. The bill would require pension fiduciaries to consider only financial factors and would define “financial” as excluding actions taken “to further social, political, or ideological interests.” It lists categories of ESG factors that could be considered furthering such interests, including considerations around greenhouse gas reductions and other environmental standards; board diversity; abortion access; access to gender-affirmation surgery; and divestment from weapons manufacturers.
In its report of “inexpedient to legislate” (ITL), the Senate Committee on Executive Departments and Administration said that it heard testimony that the New Hampshire Retirement System (NHRS) already acts solely out of fiduciary duty and that the bill could prohibit the pension system from investing in well performing companies.
House bill. Two weeks ago, HB 1267 was struck down by a voice vote of the full House adopting the committee report of ITL. The bill would have made it a felony to invest public retirement or taxpayer funds “knowingly in a manner violating fiduciary duty concerning environmental, social, and governance (ESG) criteria.” Notes on the bill’s methodology include concerns raised by some stakeholders: the state Treasury said that the bill could conflict with laws and executive orders requiring it to maximize financial benefits for the state, and NHRS said the restrictions could reduce investment returns.
Pension’s position. The NHRS board met earlier this week to discuss the Senate and House bills, among other matters. Minutes from the meeting include a draft resolution opposing the bills, noting, “Environmental, Social, and Governance (ESG) or any other non-pecuniary factor is never considered as an end unto itself but is one of many factors viewed in regard to its potential impact on our ability to obtain the highest return for New Hampshire’s active and retired public employees and their beneficiaries.”
NHRS notes that in 1987, it opposed a bill that would have required it to divest from companies doing business in Northern Ireland that failed to take affirmative action under the MacBride Principles. “At the time, external legal counsel warned NHRS that legislation adding non-fiduciary factors to the use of retirement funds would mean that these funds would be no longer used for ‘the exclusive purpose’ of providing benefits,” the resolution states.