Indiana Amends ESG Bill to Exclude Private Markets

Changes mean legislation will cost state pension fund $5.5 million over 10 years instead of $6.7 billion.


Indiana’s House of Representatives’ Ways and Means Committee passed an amended anti-ESG bill on Tuesday that significantly reduces the additional costs the state’s retirement system would have to shoulder if the proposed legislation becomes law.

Indiana House Bill 1008, which was introduced last month by State Representative Ethan Manning, a Republican, requires the state’s public retirement system to divest from and stop doing business with companies or funds that use environmental, social and governance factors in their investment decisions.

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The bill is intended to provide that “a fiduciary, in making and supervising investments of a reserve fund of the public pension system, shall discharge the fiduciary’s duties solely in the financial interest of the participants and beneficiaries of the public pension system.”

An analysis of the original bill by the Indiana Legislative Services Agency said the bill could result in reduced aggregated investment returns over the next decade of approximately $6.7 billion, $6.4 billion of which would be lost by the state’s public defined benefit plans, with $300 million set to be lost from defined contribution funds.

According to the LSA’s analysis, the original bill would have limited the potential for active management of Indiana Public Retirement System funds, which would have essentially prohibited its use of active managers and investments in private markets. The LSA report anticipated this could lead to lower investment returns, which would then force a “significant increase” in employer contributions and state fund appropriations.

However, after the bill was amended to make private market funds exempt from its provisions, a new analysis from the LSA found that the bill would cost the state’s retirement system $5.5 million over 10 years, rather than $6.7 billion.

“INPRS estimates that the changes in the bill regarding proxy voting would increase administrative costs by $550,000 per year,” the new analysis stated, “$200,000 for custom proxy voting policy and infrastructure and $350,000 to hire additional investment staff to manage proxy voting.” It also noted that the retirement system has more than 200,000 proxy votes per year and that the public pension funds bear the administrative costs for them.

The analysis also said the bill would increase workload and expenditures for state agencies involved in establishing or maintaining a public retirement or pension plan, which includes the INPRS, the state police and the state treasurer.

“The bill would significantly increase reporting and tracking requirements for public pensions and proxy votes,” the analysis said.

Kevin Brinegar, president and CEO of the Indiana Chamber of Commerce, which had opposed the original version of the bill, said the organization “is still opposed to the bill as amended.”

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Indiana Anti-ESG Bill Could Cost State Pensions $6.7 Billion Over 10 Years

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Australia Seeks Public Consultation on Pension Legislation

Former government accused of raiding superannuation system ‘with devastating impacts’ on savings.

 

 


The Australian government is seeking public input on its national pension system, which it said had been abused by the previous administration.

“Our superannuation system is the envy of the world,” Australian Treasurer Jim Chalmers said in a release. “But the last decade has seen the former government raid the superannuation system for their own purposes – with devastating impacts on Australians’ savings.”

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The administration of Prime Minister Anthony Albanese, elected in May 2022, says it took the next step toward passing pension legislation on Monday, when it released a consultation paper seeking input from Australians about the benefits, phrasing and implementation of an objective for the retirement system.

The administration noted that there is currently no agreed objective of superannuation—legislated or otherwise—to help guide policymakers, regulators, industry and the wider community.

“We need to change that,” Chalmers said.

Chalmers said that because the number of Australians entering retirement age is rising, there should be a greater focus on delivering strong retirement outcomes for its citizens.

“Superannuation is an increasingly important source of capital in our economy and the significant scale of Australia’s superannuation system contributes to the strength of our financial markets through capital deepening,” Chalmers said in the statement.

The size of Australia’s retirement system has grown significantly over the last 30 years from approximately A$148 billion in 1992 to more than A$3.3 trillion. It also now represents 139.6% of gross domestic product and is projected to grow to approximately 244% of GDP by 2061.

The consultation paper outlines the government’s proposed definition of the objective, which is “to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way.”

The paper provides context about the history of Australia’s superannuation system and the rationale for seeking a superannuation law, then offers options on potential framing. It also aims to show how a legislated objective could improve accountability and transparency in policy development.

According to the government, superannuation legislation will provide stability and confidence to policymakers, regulators and the industry, and proposed changes to superannuation policy will be aligned with the purpose of the superannuation system.

“There is a significant opportunity for Australia to leverage greater superannuation investment in areas where there is alignment between the best financial interests of members and national economic priorities, particularly given the long‑term investment horizon of superannuation funds,” Chalmers said.

Digital and mailed submissions in response to the consultation paper close on March 31.

 

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