Sustainable Investment Policies Act of 2020

I 116TH CONGRESS 2D SESSION H. R. 8960 To amend the Investment Advisers Act of 1940 to require large asset managers to establish Sustainable Investment Policies. IN THE HOUSE OF REPRESENTATIVES DECEMBER 14, 2020 Mr. LEVIN of Michigan (for himself, Mr. BRENDAN F. BOYLE of Pennsyl- vania, Mrs. AXNE, 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 require large asset managers to establish Sustainable Investment Policies. 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 2020’’. 5 SEC. 2. FINDINGS. 6 The Congress finds the following: 7 (1) There is now incontrovertible evidence that 8 ESG factors are financially material. 9 VerDate Sep 11 2014 00:27 Dec 28, 2020 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H8960.IH H8960 pbinns on DSKJLVW7X2PROD with BILLS 2 •HR 8960 IH (2) Decades of policy interpretations from the 1 Department of Labor and Securities and Exchange 2 Commission have created confusion as to fiduciaries’ 3 obligations with regard to ESG integration. 4 (3) Recent policies of the Securities and Ex- 5 change Commission have had a chilling effect on 6 ESG integration and active ownership with a view 7 toward advancing a sustainable economy. 8 SEC. 3. PURPOSE. 9 The purpose of this Act is to require large investment 10 advisors to adopt and implement policies to consider Envi- 11 ronmental, Social, and Governance (ESG) factors when 12 making investments. 13 SEC. 4. SUSTAINABLE INVESTMENT POLICY OF INVEST- 14 MENT ADVISERS. 15 Section 203 of the Investment Advisers Act of 1940 16 (15 U.S.C. 80b–3) is amended by adding at the end the 17 following: 18 ‘‘(o) SUSTAINABLE INVESTMENT POLICY.— 19 ‘‘(1) IN GENERAL.—No person may be reg- 20 istered as an investment adviser under this section 21 unless the person files a sustainable investment pol- 22 icy with the Commission that such person follows in 23 carrying out the duties of an investment adviser. 24 ‘‘(2) CONTENTS.— 25 VerDate Sep 11 2014 00:27 Dec 28, 2020 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H8960.IH H8960 pbinns on DSKJLVW7X2PROD with BILLS 3 •HR 8960 IH ‘‘(A) IN GENERAL.—A sustainable invest- 1 ment policy described under paragraph (1) shall 2 include policies of the person, with respect to— 3 ‘‘(i) corporate governance practices by 4 entities in which the plan invests, including 5 executive compensation, board diversity, 6 the independence of board chairs, political 7 spending and lobbying disclosure; 8 ‘‘(ii) characteristics of workforces em- 9 ployed by entities in which the plan in- 10 vests, including compensation and benefits, 11 health and safety, diversity and demo- 12 graphics, skills and training, retention and 13 turnover, full-time and part-time employ- 14 ment, and the use of independent contrac- 15 tors; 16 ‘‘(iii) labor and human rights compli- 17 ance by entities in which the plan invests, 18 including workers’ freedom of association, 19 the right to collectively bargain, and the 20 prevention of employment discrimination, 21 child labor, and forced labor in company 22 operations and supply chains; 23 ‘‘(iv) the implementation, to the ex- 24 tent practicable, of practices which en- 25 VerDate Sep 11 2014 00:27 Dec 28, 2020 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H8960.IH H8960 pbinns on DSKJLVW7X2PROD with BILLS 4 •HR 8960 IH hance diversity and inclusion performance 1 within the workforce, senior leadership, 2 business procurement, philanthropy and/or 3 board of directors; 4 ‘‘(v) environmental risks to the assets 5 and properties of entities in which the 6 funds advised by the person invest, includ- 7 ing— 8 ‘‘(I) climate risks and contribu- 9 tions; 10 ‘‘(II) environmental risks that 11 are not related to climate, such as in- 12 dustrial pollution, habitat destruction, 13 and other forms of environmental deg- 14 radation; 15 ‘‘(III) impact to species 16 endangerment and extinction; and 17 ‘‘(IV) pollution of land, air, and 18 water related to the operation of the 19 entities invested in by the plan; pollu- 20 tion of land, air and water related to 21 the operation of the entities in which 22 funds advised by the person invest; 23 ‘‘(vi) due diligence and practices re- 24 garding supply chain management, includ- 25 VerDate Sep 11 2014 00:27 Dec 28, 2020 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H8960.IH H8960 pbinns on DSKJLVW7X2PROD with BILLS 5 •HR 8960 IH ing environmental, human rights, and 1 worker compensation considerations; and 2 ‘‘(vii) tax practices of entities in which 3 the plan invests, including international 4 tax avoidance strategies and tax payment 5 disclosure. 6 ‘‘(3) COMPLIANCE AUDIT.— 7 ‘‘(A) IN GENERAL.—Each registered in- 8 vestment adviser shall contract with an auditor 9 (as described in rule 2–10 of section 210.01 of 10 title 17, Code of Federal Regulations) to per- 11 form an annual evaluation of the adviser’s com- 12 pliance with the sustainable investment policy 13 filed with the Commission. 14 ‘‘(B) REPORT.—An auditor performing an 15 evaluation under subparagraph (A) shall file, 16 and make publicly available, a report on such 17 evaluation to the adviser and the Commission. 18 ‘‘(4) FIDUCIARY SAFE HARBOR.—The Commis- 19 sion may, by order, determine that an investment 20 adviser has not breached its fiduciary duty with re- 21 spect to consideration of factors outlined under this 22 subsection if the investment adviser is in compliance 23 with this subsection.’’. 24 Æ VerDate Sep 11 2014 00:27 Dec 28, 2020 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6301 E:\BILLS\H8960.IH H8960 pbinns on DSKJLVW7X2PROD with BILLS