HB 1253: Arkansas Prohibits State Pension Fiduciaries from Considering Nonpecuniary Goals, Including ESG Factors
Summary
Passed in April 2023, HB 1253 affects all statewide public employee retirement systems and states that the selection of investments should be made using only pecuniary factors. The law also adds new requirements about the voting of ownership interests of the investments that are held. The responsible board should continue to hold the voting rights of the investment, and the voting rights should only be exercised in a way that is consistent with the fiduciary's obligation to gain the best earnings for the plan and not for other political purposes.
A pecuniary factor is defined by the law to mean "a factor that has a material effect on the financial risk or financial return, or both, of an investment based on appropriate investment horizons consistent with the pension benefit plan's investment objectives and the funding policy." The law provides that this does not include nonpecuniary factors, defined as "any action taken or factor considered by a fiduciary with any purpose to further environmental, social, political, or ideological goals."
