A bill has been introduced in the Maine House of Representatives that would prohibit consideration of nonpecuniary factors such as environmental, social and corporate governance (ESG) factors in the investment of Maine Public Employees Retirement System funds.
Rep. Chad Perkins (R-Dover-Foxcroft) introduced LD 1562, an Act to Protect the Retirement of State Employees and Teachers by Establishing Standards for Fiduciary Responsibility, on April 11, 2023.
This bill would establish certain standards of care for fiduciaries of the Maine Public Employees Retirement System and would generally prohibit decision-making regarding investments in the retirement system based on certain nonpecuniary factors such as ESG, ideological or political factors.
More specifically, the bill provides that a fiduciary's evaluation of an investment or evaluation or exercise of any right appurtenant to an investment must take into account only pecuniary factors. A fiduciary:
- Could not promote nonpecuniary benefits or any other nonpecuniary goals; and
- Could consider nonpecuniary benefits only if the factors present economic risks or opportunities that qualified investment professionals would treat as material economic considerations under generally accepted investment theories. A fiduciary would be required to evaluate those factors to:
- Prudently assess the impact of the factors on risk and return;
- Examine the level of diversification, degree of liquidity and the potential return or risk in comparison with other available alternative investments that would play a similar role in the plans' portfolios; and
- Determine whether greater returns can be achieved through investments that rank poorly on ESG factors.
Status: The bill was referred to the House Committee on Labor and Housing.