H.F. 653 Section 1. Section 12.8, subsection 1, Code 2023, is amended 1 to read as follows: 2 1. The treasurer of state shall invest or deposit, subject 3 to chapters 12F , 12H , and 12J , and 12K and as provided by law, 4 any of the public funds not currently needed for operating 5 expenses and shall do so upon receipt of monthly notice from 6 the director of the department of administrative services of 7 the amount not so needed. In the event of loss on redemption 8 or sale of securities invested as prescribed by law, and if 9 the transaction is reported to the executive council, neither 10 the treasurer nor director of the department of administrative 11 services is personally liable but the loss shall be charged 12 against the funds which would have received the profits or 13 interest of the investment and there is appropriated from the 14 funds the amount so required. 15 Sec. 2. NEW SECTION . 12K.1 Legislative findings and intent. 16 The general assembly intends to ensure that state funds and 17 funds administered by the state, including public employee 18 retirement funds, are protected from political influence 19 detrimental to the financial health of the state and its 20 citizens and promote the general assembly’s goal of protecting 21 free enterprise. 22 Sec. 3. NEW SECTION . 12K.2 Definitions. 23 As used in this chapter, unless the context otherwise 24 requires: 25 1. “Boycott of certain companies” means, except as otherwise 26 provided in chapters 12F, 12H, and 12J or without a reasonable 27 business purpose, refusal to invest in a company, termination 28 of business activities with a company, or another action that 29 is intended to penalize, inflict economic harm on, or limit 30 commercial relations with a company because the company does 31 any of the following: 32 a. Engages in, or does business with a company that engages 33 in, the exploration, production, utilization, transportation, 34 or sale of fossil fuel-based energy, timber, mining, or 35 -1- LSB 1119HV (2) 90 ec/rn 1/ 7

H.F. 653 production agriculture. 1 b. Engages in, or does business with a company that engages 2 in, the manufacturing, distribution, sale, import, export, or 3 lawful use of firearms, firearm parts, firearm accessories, or 4 ammunition. 5 2. “Company” means any business or business entity, bank, 6 national banking association, nonbank financial institution, 7 financial services company, investment company, bank and trust 8 company, trust company, savings and loan association, building 9 and loan association, mutual savings bank, credit union, or 10 savings bank, including a wholly owned subsidiary, majority- 11 owned subsidiary, parent company, or affiliate of such business 12 or business entity, that exists for the purpose of making a 13 profit. 14 3. “Nonpecuniary social investment” means, except as 15 otherwise provided in this chapter and chapters 12F, 12H, 16 and 12J, investment or commitment of public funds to further 17 environmental, social, governance, political, or ideological 18 interests and for the purpose of obtaining an effect other than 19 a maximized return to the public fund without a reasonable 20 business purpose. 21 4. “Public fund” means the treasurer of state, the state 22 board of regents, the public safety peace officers’ retirement 23 system created in chapter 97A, the Iowa public employees’ 24 retirement system created in chapter 97B, the statewide fire 25 and police retirement system created in chapter 411, or the 26 judicial retirement system created in chapter 602. 27 5. “Reasonable business purpose” means includes any purpose 28 directly related to any of the following: 29 a. Promoting the financial success or stability of a 30 company. 31 b. Mitigating risk to a company. 32 c. Complying with legal or regulatory requirements. 33 d. Limiting liability of a company. 34 6. “Scrutinized company” means any company that engages in 35 -2- LSB 1119HV (2) 90 ec/rn 2/ 7

H.F. 653 nonpecuniary social investment on behalf of a public fund or a 1 boycott of certain companies on behalf of a public fund. 2 Sec. 4. NEW SECTION . 12K.3 Public funds —— contract and 3 investment requirements. 4 1. A public fund shall not enter into a contract with a 5 company to provide investment or management of securities 6 services to the public fund so long as such company engages 7 in nonpecuniary social investment or a boycott of certain 8 companies on behalf of the public fund. 9 2. In accordance with sound investment criteria and 10 consistent with fiduciary obligations, a public fund shall 11 terminate a contract to provide investment or management of 12 securities services with a company that begins to engage 13 in nonpecuniary social investment or a boycott of certain 14 companies on behalf of the public fund. The contract will be 15 terminated within six months of a written notice to terminate 16 sent to the company. 17 3. This section does not apply to a public fund acting on 18 behalf of a participant directing investments in a retirement 19 account in which the participant has the authority to make such 20 a decision independently from the public fund. 21 Sec. 5. NEW SECTION . 12K.4 Annual report. 22 On October 1, 2024, and each October 1 thereafter, each 23 public fund shall make available to the public, and file with 24 the general assembly, an annual report covering the prior 25 fiscal year that includes all contracts terminated as provided 26 in section 12K.3 during the fiscal year. 27 Sec. 6. NEW SECTION . 12K.5 Public funds —— legal 28 obligations. 29 1. With respect to actions taken in compliance with this 30 chapter, including all good-faith determinations regarding 31 companies as required by this chapter, the public fund shall 32 be immune from any liability and exempt from any conflicting 33 statutory or common law obligations, including any such 34 obligations in respect to choice of asset managers, investment 35 -3- LSB 1119HV (2) 90 ec/rn 3/ 7

H.F. 653 funds, or investments for the public fund’s securities 1 portfolios. 2 2. This chapter shall not limit the ability of a public fund 3 to terminate the contract of an investment manager or other 4 vendor at any time and for any reason in the exercise of the 5 public fund’s fiduciary duties. 6 Sec. 7. Section 35A.13, subsection 4, paragraph a, Code 7 2023, is amended to read as follows: 8 a. Notwithstanding subsection 5 , moneys in the fund, except 9 so much of the fund as may be necessary to be kept on hand 10 for the making of disbursements under this section , shall 11 be invested by the treasurer of state, in consultation with 12 the commission and the public retirement systems committee 13 established by section 97D.4 , in any investments authorized for 14 the Iowa public employees’ retirement system in section 97B.7A , 15 including common stock, and subject to the requirements of 16 chapters 12F , 12H , and 12J , and 12K, and the earnings therefrom 17 shall be credited to the fund. The treasurer of state may 18 execute contracts and agreements with investment advisors, 19 consultants, and investment management and benefit consultant 20 firms in the administration of investments of moneys in the 21 fund. 22 Sec. 8. Section 97A.7, subsection 1, Code 2023, is amended 23 to read as follows: 24 1. The board of trustees shall be the trustees of the 25 retirement fund created by this chapter as provided in section 26 97A.8 and shall have full power to invest and reinvest funds 27 subject to the terms, conditions, limitations, and restrictions 28 imposed by subsection 2 and chapters 12F , 12H , and 12J , and 29 12K and subject to like terms, conditions, limitations, and 30 restrictions said trustees shall have full power to hold, 31 purchase, sell, assign, transfer, or dispose of any of the 32 securities and investments of the retirement fund which have 33 been invested, as well as of the proceeds of said investments 34 and any moneys belonging to the retirement fund. The board 35 -4- LSB 1119HV (2) 90 ec/rn 4/ 7

H.F. 653 of trustees may authorize the treasurer of state to exercise 1 any of the duties of this section . When so authorized the 2 treasurer of state shall report any transactions to the board 3 of trustees at its next monthly meeting. 4 Sec. 9. Section 97B.4, subsection 5, Code 2023, is amended 5 to read as follows: 6 5. Investments. The system, through the chief investment 7 officer, shall invest, subject to chapters 12F , 12H , and 12J , 8 and 12K and in accordance with the investment policy and 9 goal statement established by the board, the portion of the 10 retirement fund which, in the judgment of the system, is not 11 needed for current payment of benefits under this chapter 12 subject to the requirements of section 97B.7A . 13 Sec. 10. Section 262.14, unnumbered paragraph 1, Code 2023, 14 is amended to read as follows: 15 The board may invest funds belonging to the institutions, 16 subject to chapters 12F , 12H , and 12J , and 12K and the 17 following regulations: 18 Sec. 11. Section 411.7, subsection 1, Code 2023, is amended 19 to read as follows: 20 1. The board of trustees is the trustee of the fire 21 and police retirement fund created in section 411.8 and 22 shall annually establish an investment policy to govern the 23 investment and reinvestment of the moneys in the fund, subject 24 to the terms, conditions, limitations, and restrictions 25 imposed by subsection 2 and chapters 12F , 12H , and 12J , and 26 12K . Subject to like terms, conditions, limitations, and 27 restrictions the system has full power to hold, purchase, sell, 28 assign, transfer, or dispose of any of the securities and 29 investments in which the fund has been invested, as well as of 30 the proceeds of the investments and any moneys belonging to the 31 fund. 32 Sec. 12. Section 602.9111, subsection 1, Code 2023, is 33 amended to read as follows: 34 1. So much of the judicial retirement fund as may not be 35 -5- LSB 1119HV (2) 90 ec/rn 5/ 7

H.F. 653 necessary to be kept on hand for the making of disbursements 1 under this article shall be invested by the treasurer of 2 state in any investments authorized for the Iowa public 3 employees’ retirement system in section 97B.7A and subject to 4 the requirements of chapters 12F , 12H , and 12J , and 12K, and 5 the earnings therefrom shall be credited to the fund. The 6 treasurer of state may execute contracts and agreements with 7 investment advisors, consultants, and investment management and 8 benefit consultant firms in the administration of the judicial 9 retirement fund. 10 EXPLANATION 11 The inclusion of this explanation does not constitute agreement with 12 the explanation’s substance by the members of the general assembly. 13 This bill creates new Code chapter 12K, which restricts 14 public funds, defined as the treasurer of state, the state 15 board of regents, the Iowa public employees’ retirement 16 system (IPERS), the public safety peace officers’ retirement 17 system, the statewide fire and police retirement system, and 18 the judicial retirement system from generally entering into a 19 contract with certain companies engaged in nonpecuniary social 20 investment or a boycott of certain companies. 21 The bill defines “boycott of certain companies” as, without 22 a reasonable business purpose or as otherwise required under 23 Code chapters 12F, 12H, and 12J, to take any adverse action to 24 penalize or limit business opportunities for companies engaging 25 or doing business with fossil fuel-based energy, timber, 26 mining, production agriculture, firearms, firearm parts, 27 firearm accessories, or ammunition companies. “Nonpecuniary 28 social investment” is defined to mean, except as otherwise 29 provided in new Code chapter 12K in the bill and Code chapters 30 12F, 12H, and 12J, investment or commitment of public funds 31 to further environmental, social, governance, political, or 32 ideological interests without a reasonable business purpose. 33 The bill also defines “scrutinized company” as any company that 34 engages in nonpecuniary social investment on behalf of a public 35 -6- LSB 1119HV (2) 90 ec/rn 6/ 7

H.F. 653 entity or a boycott of certain companies on behalf of a public 1 entity. 2 New Code section 12K.3 requires that a public fund shall not 3 enter into a contract with a company to provide investment or 4 management of securities services to the public fund so long 5 as such company engages in nonpecuniary social investment or a 6 boycott of certain companies on behalf of the public fund. If 7 the public fund has a contract for investment services with a 8 company subject to termination, the public fund shall proceed 9 to terminate the contract with that company in six months, 10 as applicable, so long as the company remains a scrutinized 11 company. The bill provides that this requirement on public 12 funds does not apply to a public fund acting on behalf of a 13 participant directing investments in a retirement account. 14 The bill further requires each public fund to prepare 15 and make available to the public, and file with the general 16 assembly, an annual report, beginning October 1, 2024, 17 concerning actions taken by the public fund relative to the 18 requirements of new Code chapter 12K in the previous fiscal 19 year. 20 The bill further provides that with respect to actions 21 taken in compliance with the bill, including all good-faith 22 determinations regarding companies as required, the public 23 fund shall be immune from any liability and exempt from any 24 conflicting statutory or common law obligations, including 25 any such obligations in respect to choice of asset managers, 26 investment funds, or investments for the public fund. In 27 addition, the bill provides that the requirements of the bill 28 shall not limit the ability of a public fund to terminate 29 any contract of an investment manager or other vendor in the 30 exercise of the public fund’s fiduciary duties. 31 The bill makes conforming changes to Code sections 12.8, 32 35A.13, 97A.7, 97B.4, 262.14, 411.7, and 602.9111. 33 -7- LSB 1119HV (2) 90 ec/rn 7/ 7