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Minutes for SB291 - Committee on Federal and State Affairs
Short Title
Enacting the Kansas public investments and contracts protection act concerning environmental, social and governance (ESG) criteria, prohibiting the state and political subdivisions from giving preferential treatment to or discriminating against companies based on such ESG criteria in procuring or letting contracts, requiring KPERS fiduciaries to act solely in the financial interest of the participants and beneficiaries of the system, restricting state agencies from adopting ESG criteria or requiring any person or business to operate in accordance with such criteria, directing registered investment advisers to provide ESG criteria notice to clients and providing for enforcement of such act by the attorney general.
Minutes Content for Wed, Mar 8, 2023
The Chairman called for neutral oral testimony.
Alex Orel, Senior Vice President, Government Relations, Kansas Bankers Association, spoke as neutral on SB291. He stated they are neutral except for section 5, which contains disclosure language, in which investors would be required to be informed about potential losses from funds using ESG (environmental, social, and governance) criteria. He stated providing such disclosure would place a burden on brokers. He said the banks in their association, with regard to ESG, hold the basic principle that they should be able to lend, or not lend, and invest in businesses at their discretion, without government interference. He asked that when the Committee is looking at this issue, to please look at the federal level and what they are doing with ESG regulation. (Attachment 1)
Michael Murray, Executive Director, Kansas Credit Union Association, spoke as neutral on SB291. He stated, like the Banker's Association, they are neutral except for the disclosure language in section 5, and are opposed to punitive provisions in SB224. He said the bottom line is local financial institutions shouldn't be told who they can, and can't do business with. (Attachment 2)
The Chairman opened for questions of Mr. Orel and Mr. Murray.
Seeing no more questions, oral neutral testimony continued.
Eric Stafford, Vice President of Government Affairs, Kansas Chamber, spoke as neutral on SB291. He stated the push for ESG policies and investments is being used to alter the market, but we need to let the markets rule freely, without government intervention. He said penalizing businesses should not be on the table. (Attachment 3)
The Chairman opened for questions of Mr. Stafford.
Conferees providing neutral written only testimony:
Scott Heidner, Executive Director, American Council of Engineering Companies of Kansas (Attachment 4)
Rabbi Moti Rieber, Kansas Interfiath Action (Attachment 5)
Scot Kibbe, Vice President, State Governmental Relations, American Property Casualty Insurance Association (Attachment 6)
The Chairman called for oral opponent testimony.
Alan Conroy, Executive Director, Kansas Public Employee Retirement Fund, (KPERS), spoke as an opponent of the bills. He stated KPERS has several areas of concern:
- KPERS is a fiduciary, and is externally managed. Those managers are fiduciaries as well, and the sole purpose is to provide funding for their members. The fiduciary definition in bill would make it difficult for them to retain their current managers.
- If they have to start divesting quickly, there will be about $1.1 billion loss.
- They would have to restructure the investments in the trust fund.
- Indemnification and proxy votes are also an issue. (Attachment 7) (Attachment 8)
Ernie Claudel, Kansas Coalition of Public Retirees and Kansas Association of Retired School Personnel, spoke as an opponent of the bill, and listed a few things he believes would happen if the legislation were enacted:
- If KPERS were forced to divest, they would violate the principle of buying low and selling high, and there would be losses in long term investments.
- Only eight of the hundreds of investors they use would stay eligible under the law
- There is uncertainty and danger with the legislation and no guarantee on the outcome. (Attachment 9) (Attachment 10)
Timothy Graham, Kansas National Education Association, spoke as an opponent of the bill. He said the legislature hasn't done anything to tackle the big issues with KPERS, such as the unfunded ratio, and this legislation could make the fund insolvent. (Attachment 11)
Zack Pistora, Legislative Director and State Lobbyist, Kansas Chapter of Sierra Club, spoke as an opponent of the bill. He stated the Sierra Club views ESG as a framework to have secure investments over time, and views SB291 as an unnecessary interference and government intrusion. They favor more investment in energy efficiency and lowering "greenhouse gas" emissions. (Attachment 12)
Conferees providing written only opponent testimony
Scot Kibbe, Vice President, State Government Relations, American Property Casualty Insurance Association (Attachment 13)
Michael Koss, City of Overland Park (Attachment 14)
John Goodyear, General Counsel, League of Kansas Municipalities (Attachment 15)
The Chairman called for a period of questions and answers.
Seeing no more questions, the Chairman closed the hearing on SB291 and SB224.
The Chairman adjourned the hearing at 11:52 am.
