INDIANAPOLIS — Statehouse Republicans have proposed a bill which would limit fiduciary capabilities for Indiana’s public pension system, specifically stopping any banks from practicing in ESG (Enviornmental, Social, or Governance) policies.
ESG policies consider the effects of investments before they are made, which sometimes causes banks to avoid making investments to industries such as coal or firearm production.
HB 1008 would require the state treasurer to report and stop working with any banks that have ESG policies when making investments.
The president and CEO of the Indiana Chamber of Commerce, Kevin Brinegar, says the limitations from House Bill 1008 could cost billions.
“If that legislation was enacted, it could result in a reduction of over 1% in the investment earnings for those billions of dollars of funds that the state is holding for various people with state-level pensions,” said Brinegar. “Over 10 years that could result in a reduction of investment earnings of nearly $7 billion.”
He said that when HB 1008 was originally filed last year, but new information about the consequences of a similar bill in Texas shows what could happen to Indiana.
“There was a study…that found that local governments [in Texas] had spent just in a short 6 month period over $500 million more in borrowing costs. Because the anti-ESG legislation had driven so many banks out from doing any business in Texas that there wasn’t as much competition for municipal bonds and so the borrowing costs of those bonds went up significantly.”
“I think in fairness to them that they were not aware of that potential impact when the bill was filed,” Brinegar added, “the bill was filed last year.”
Due to that study – and the lack of testimony for the bill even being related to pensions – Brinegar believes that HB 1008 is more of a statement by Republicans than anything.
Brinegar believes that with such a high price tag, HB 1008 will be a hard sell for lawmakers.
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