Sustainable Investment Policies Act of 2021

I 117TH CONGRESS 1ST SESSION H. R. 3605 To amend the Investment Advisers Act of 1940 to enable consideration and promote disclosure and transparency of sustainable investment poli- cies by large asset managers, and for other purposes. IN THE HOUSE OF REPRESENTATIVES MAY 28, 2021 Mr. LEVIN of Michigan (for himself, Mrs. AXNE, Mr. BRENDAN F. BOYLE of Pennsylvania, and Mr. GARCI´A of Illinois) introduced the following bill; which was referred to the Committee on Financial Services A BILL To amend the Investment Advisers Act of 1940 to enable consideration and promote disclosure and transparency of sustainable investment policies by large asset man- agers, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Sustainable Invest- 4 ment Policies Act of 2021’’. 5 SEC. 2. FINDINGS. 6 The Congress finds the following: 7 VerDate Sep 11 2014 05:35 Jun 24, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H3605.IH H3605 kjohnson on DSK79L0C42PROD with BILLS 2 •HR 3605 IH (1) Environmental, social, and governance (in 1 this Act referred to as ‘‘ESG’’) include the potential 2 for economic benefits, such as local job creation and 3 economic development, in addition to investment re- 4 turns, as provided by investments sometimes re- 5 ferred to as ‘‘Economically Targeted Investments’’ 6 or ‘‘ETIs’’. 7 (2) There is now incontrovertible evidence that 8 ESG factors can have substantial effects on invest- 9 ment performance and are important to many inves- 10 tors and that investors have a significant interest in 11 such findings. 12 (3) Investor findings show a dramatic interest 13 in investments that consider ESG factors. 14 (4) Decades of policy interpretations from the 15 Department of Labor and the Securities and Ex- 16 change Commission have created confusion as to the 17 obligations of a fiduciary with regard to ESG 18 intergration. 19 (5) Recent policies of the Securities and Ex- 20 change Commission have had a chilling effect on 21 ESG integration and active ownership with a view 22 toward advancing a sustainable economy. 23 VerDate Sep 11 2014 05:35 Jun 24, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H3605.IH H3605 kjohnson on DSK79L0C42PROD with BILLS 3 •HR 3605 IH SEC. 3. SUSTAINABLE INVESTMENT POLICY OF INVEST- 1 MENT ADVISERS. 2 Section 203 of the Investment Advisers Act of 1940 3 (15 U.S.C. 80b–3) is amended by adding at the end the 4 following new subsection: 5 ‘‘(o) SUSTAINABLE INVESTMENT POLICY.— 6 ‘‘(1) IN GENERAL.—No person may be reg- 7 istered as an investment adviser under this section 8 unless such person— 9 ‘‘(A) files a sustainable investment policy 10 with the Commission; and 11 ‘‘(B) complies with such policy in carrying 12 out the duties of an investment adviser. 13 ‘‘(2) CONTENTS.—A sustainable investment 14 policy described under paragraph (1)(A) shall in- 15 clude the policies of the person with respect to the 16 following: 17 ‘‘(A) Environmental concerns, including 18 environmental risks to the assets and properties 19 of entities in which the funds invest, includ- 20 ing— 21 ‘‘(i) climate risks and contributions; 22 ‘‘(ii) associated environmental risks, 23 including— 24 ‘‘(I) industrial pollution; 25 ‘‘(II) habitat destruction; 26 VerDate Sep 11 2014 05:35 Jun 24, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H3605.IH H3605 kjohnson on DSK79L0C42PROD with BILLS 4 •HR 3605 IH ‘‘(III) deforestation; and 1 ‘‘(IV) other forms of environ- 2 mental degradation; and 3 ‘‘(iii) pollution of land, air, or water 4 related to the operation of the entities in 5 which fund invests. 6 ‘‘(B) Social considerations, including— 7 ‘‘(i) characteristics of workforces em- 8 ployed by entities in which the fund in- 9 vests, including— 10 ‘‘(I) compensation and benefits; 11 ‘‘(II) health and safety; 12 ‘‘(III) diversity and demo- 13 graphics; 14 ‘‘(IV) skills and training; 15 ‘‘(V) retention and turnover; 16 ‘‘(VI) full-time and part-time em- 17 ployment; and 18 ‘‘(VII) the use of independent 19 contractors; 20 ‘‘(ii) labor and human rights compli- 21 ance by entities in which the fund invests, 22 including— 23 ‘‘(I) workers’ freedom of associa- 24 tion; 25 VerDate Sep 11 2014 21:37 Jul 07, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H3605.IH H3605 kjohnson on DSK79L0C42PROD with BILLS 5 •HR 3605 IH ‘‘(II) the right to collectively bar- 1 gain; and 2 ‘‘(III) the prevention of employ- 3 ment discrimination, child labor, and 4 forced labor in the operations and 5 supply chains of the entity; 6 ‘‘(iii) the implementation of practices 7 which enhance diversity and inclusion per- 8 formance within the workforce, senior lead- 9 ership, business procurement, philan- 10 thropy, and the board of directors; 11 ‘‘(iv) due diligence and practices re- 12 garding supply chain management, includ- 13 ing— 14 ‘‘(I) environmental consider- 15 ations; 16 ‘‘(II) human rights; and 17 ‘‘(III) workers’ compensation 18 considerations; and 19 ‘‘(v) the potential for achieving eco- 20 nomic benefits in addition to investment 21 returns. 22 ‘‘(C) Governance considerations, includ- 23 ing— 24 VerDate Sep 11 2014 05:35 Jun 24, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H3605.IH H3605 kjohnson on DSK79L0C42PROD with BILLS 6 •HR 3605 IH ‘‘(i) corporate governance practices by 1 entities in which the fund invests; and 2 ‘‘(ii) tax practices of entities in which 3 the fund invests, including international 4 tax avoidance strategies and tax payment 5 disclosure. 6 ‘‘(D) Other relevant economically targeted 7 investment, or environmental, social, and gov- 8 ernance considerations and factors. 9 ‘‘(3) COMPLIANCE AUDIT.— 10 ‘‘(A) IN GENERAL.—Not less than annu- 11 ally, each registered investment adviser shall 12 contract with an auditor to perform an audit of 13 the adviser’s compliance with the sustainable 14 investment policy filed with the Commission. 15 ‘‘(B) REPORT.—An auditor performing an 16 evaluation under subparagraph (A) shall file, 17 and make publicly available, a report on such 18 evaluation to the adviser and the Commission. 19 ‘‘(C) FIDUCIARY SAFE HARBOR.—The 20 Commission may, by order, determine that an 21 investment adviser has not breached its fidu- 22 ciary duty with respect to consideration of fac- 23 tors outlined under this subsection if the invest- 24 VerDate Sep 11 2014 05:35 Jun 24, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H3605.IH H3605 kjohnson on DSK79L0C42PROD with BILLS 7 •HR 3605 IH ment adviser is in compliance with this sub- 1 section.’’. 2 Æ VerDate Sep 11 2014 05:35 Jun 24, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6301 E:\BILLS\H3605.IH H3605 kjohnson on DSK79L0C42PROD with BILLS