Anti-ESG pension bill’s projected $6.7 billion price tag over 10 years prompts concern for Indiana governor, top lawmakers

Indiana’s top government leaders said this week they are concerned about the potential multi-billion-dollar impact of a public pension bill intended to crack down on the environmental, social and governmental framework known as ESG investing.

And senators are pointing to their less-stringent alternative as House lawmakers scramble to “tighten it up.”

“Intent, and where that potentially collides with reality, is always of concern to me,” Republican Gov. Eric Holcomb told reporters Tuesday. “And we don’t want to do anything that risks — anything that responsibly risks — our pension or what retirees expect.”

House Bill 1008 mandates that Indiana’s public pension system divest from investment firms or funds that use ESG investment criteria.

Author Rep. Ethan Manning, R-Logansport, and supporters say the proposal would ensure that the Indiana Public Retirement System puts finances first. But an updated fiscal analysis, first reported by the Capital Chronicle, revealed the measure could drop INPRS returns by a whopping $6.7 billion over the next decade.

• That drop in returns would cut INPRS’ estimated annual return on investment from 6.25% to 5.05%, likely forcing the state and local units of government to pay more toward pensions in exchange, according to the analysis.
• It could also prevent INPRS from running a specific pension fund it’s statutorily required to offer, and could cost an additional $550,000 in administrative costs per year, paid out from the funds.

Holcomb said he’d continue to “track this bill” and “share … our concerns along the way” with lawmakers.

But House Speaker Todd Huston, R-Fishers, defended the bill, telling reporters Thursday that “businesses have a role to play, which is to run their businesses and not … be selective on when they wander into the political realm.”

“Policy should be decided by policymakers,” Huston concluded.

Senate points at alternative

Manning’s 12-page bill is significantly more detailed, such as listing protected industries, and restrictive than a one-page Senate version, which codifies a finances-first investment policy INPRS has already adopted internally.

A fiscal analysis for Senate Bill 292, in contrast, doesn’t note specific changes in state or local expenditures or revenues.

Asked if the Senate would go further in its bill, Senate President Pro Tem Rodric Bray said his caucus members “like the version that we’ve got,” adding, “we’re comfortable with that language.”

“We don’t really want a $6 billion impact — that might change our budgeting process a little bit — so we’ve been trying to avoid that,” Bray, R-Martinsville, told reporters Thursday.

Author Sen. Travis Holdman, R-Markle, also advocated for his bill.

“Mine doesn’t have a fiscal [impact] that I’m aware of,” Holdman told the Capital Chronicle. “So hopefully, the Senate bill will move and I will send it over there, and see what [House lawmakers] do with it.”

That bill passed out of committee Jan. 26 along party lines, but Holdman hasn’t yet called it down for second reading, the next step in the legislative process.

Top Senate Democrat Greg Taylor (D-Indianapolis), however, pushed back against the anti-ESG concept in both bill versions.

“I don’t want to be explaining to my constituents that work for state government that they lost investment returns on their retirement because I didn’t agree to public policy of a company that we invested in,” Taylor told reporters Thursday. “So I hope my colleagues feel the same way.”

House defends bill, prepares changes

Bills with fiscal impacts get routed through the House Ways and Means Committee after initial committee passage. The House version of the bill, after passing out of committee 9-4, along party lines, was set to be heard Wednesday.

Instead, it was pulled from the agenda.

“It sounds like it’s running into trouble and it’s been bouncing around Ways and Means, excuse me, then off the calendar,” House Minority Leader Phil GiaQuinta, D-Fort Wayne, observed in comments to reporters Thursday.

Huston, the chamber’s top Republican, said that lawmakers were putting together some changes.

“Rep. Manning and our team are working with INPRS, and we’ll find a right landing spot — you’re going to see that bill next week,” Huston said. “… We’re going to get that bill across the finish line.”

But Huston said those changes would not reduce the bill down to a bare-bones Senate look-alike.

“I think we can provide some clarity to ours [that] keeps the kind of the accountability that we want in it, but again, assuages some of the concerns that we’ve heard,” he said.

GiaQuinta was doubtful tweaks could help.

“I’m not sure what kind of amendments are actually going to help lower this $6 billion to $7 billion loss that they’re looking at, but we’ll see,” he said.