HB3961ham001 104TH GENERAL ASSEMBLY

Rep. Will Guzzardi

Filed: 3/19/2026

10400HB3961ham001 LRB104 12439 RPS 35658 a

AMENDMENT TO HOUSE BILL 3961

AMENDMENT NO. ______. Amend House Bill 3961 by replacing everything after the enacting clause with the following:

"Section 1. This Act may be referred to as the Fossil Fuel Divestment Act.

Section 5. Findings. The General Assembly finds that:

(1) Climate change is a real and serious threat to the health, welfare, and prosperity of all Illinoisans, now and in the future. Scientific evidence indicates that maintaining the status quo of fossil fuel energy production will lead to catastrophic results.

(2) Continued investment in the fossil fuel industry is counterproductive to the goals set forth in the Energy Transition Act. That Act, passed by the Illinois General Assembly and signed into law in 2021, commits the State to phasing out carbon emissions from the energy and transport sectors and requires Illinois to be 100% reliant on renewable energy by 2050.

(3) The threats posed by climate change, and the necessary transformation of the global energy system to mitigate it, will have a serious negative impact on investors whose assets are not aligned with the goal of keeping the global average temperature increase below 1.5 degrees Celsius.

(4) Continued investment in fossil fuel companies poses unacceptable risk to the long-term sustainability of the State's public pension funds that are under the State Treasurer's control and to the long-term sustainability of $26,000,000,000 of the State's investments, $17,000,000,000 in the programs established pursuant to Section 529 of the Internal Revenue Code, $12,000,000,000 of the Illinois Funds, $80,000,000 of the Secure Choice Retirement Savings Programs, and $30,000,000 in the ABLE Account Program.

(5) Because the continued investment in fossil fuel companies poses unacceptable risks to these pension funds and State investments, those who hold investment authority over these systems should divest from fossil fuel companies. Such entities are encouraged to invest in climate change solutions where consistent with acceptable financial risk.

Section 10. The Illinois Pension Code is amended by adding Section 1-110.18 as follows:

(40 ILCS 5/1-110.18 new)

Sec. 1-110.18. Fossil fuel investment prohibited.

(a) Definitions. In this Section:

"Direct holdings" means all securities of a company held directly by the pension fund or in an account or fund in which the pension fund owns all shares or interests.

"Fossil fuel company" means any company or corporation that is among the top 100 publicly traded oil and gas companies with the largest proven carbon reserves globally and the top 100 coal companies with the largest proven carbon reserves globally.

"Indirect holdings" means all securities of a company held in a publicly traded account or fund, such as a mutual fund or index fund, managed by one or more persons not employed by the pension fund, in which the pension fund owns shares or interests together with other investors not subject to this Section.

"Pension fund" means a retirement system established under Article 2, 14, 15, 16, or 18 or the Illinois State Board of Investment.

(b) Limitations on investments. Beginning on the effective date of this amendatory Act of the 104th General Assembly, in accordance with sound investment criteria and consistent with fiduciary obligations, a pension fund shall not make any new or additional investments or renew existing investments in publicly traded stocks, securities, or other obligations of any fossil fuel company or any subsidiary, affiliate, or parent of any fossil fuel company. A pension fund shall not indirectly invest in a fund, unless the board of trustees of the pension fund is satisfied on reasonable grounds that the fund is unlikely to have more than a de minimis exposure of 0.05% of its assets, averaged annually, directly or indirectly invested in fossil fuel companies. A pension fund shall not invest in any prime commercial paper or corporate bonds issued by a fossil fuel company.

(c) Divestment.

(1) The board of trustees of each pension fund shall, in accordance with sound investment criteria and consistent with fiduciary obligations and the procedures set forth in subsection (f), divest its holding in fossil fuel companies within 5 years after the effective date of this amendatory Act of the 104th General Assembly. Nothing in this subsection precludes a de minimis exposure of 0.05% or less of the pension fund's assets to any indirect holdings of stocks, securities, or other obligations of any fossil fuel company or any subsidiary, affiliate, or parent of any fossil fuel company, acquired as a good faith investment.

(2) In the time period before the sale, redemption, divestment, or withdrawal pursuant to paragraph (1), the pension fund may sign onto engagement letters or participate in shareholder resolutions regarding the scrutinized business operations of companies identified in subsection (b) in which the pension fund still owns direct or indirect holdings.

(3) Nothing in this Section precludes or limits the exercise of shareholder engagement or proxy voting rights as guaranteed by a pension fund's de minimis exposure to fossil fuel companies.

(d) Restricted company list. By January 1, 2027, the Illinois Investment Policy Board shall identify fossil fuel companies and shall assemble those identified companies into a list of restricted companies, to be distributed to each pension fund.

These efforts shall include the following, as appropriate in the Illinois Investment Policy Board's judgment:

(1) reviewing and relying on the publicly available lists commonly referred to as the Carbon Underground 200 maintained by FFI Solutions; and

(2) contacting asset managers contracted by the pension funds that invest in publicly traded assets.

The Illinois Investment Policy Board shall review the list of restricted companies on a quarterly basis based on evolving information from, among other sources, those listed in paragraph (1) of this subsection (d) and distribute any updates to the list of restricted companies to the pension funds and the State Treasurer.

(e) Illinois Investment Policy Board procedures. The Illinois Investment Policy Board shall adhere to the following procedures for companies on the list of restricted companies:

(1) For each company newly identified in subsection (d), the Illinois Investment Policy Board, unless it determines by an affirmative vote that it is unfeasible, shall send a written notice informing the company of its status and that it is subject to divestment by the pension funds.

(2) If, following the Illinois Investment Policy Board's engagement pursuant to this subsection (e) with a restricted company, that company ceases activity that designates the company to be on the Carbon Underground 200 list, the company shall be removed from the list of restricted companies and the provisions of this Section shall cease to apply to it unless it resumes such activities.

(f) Pension fund procedures. Each pension fund shall adhere to the following procedures for companies on the list of restricted companies:

(1) The pension fund shall identify those companies on the list of restricted companies in which the pension fund owns direct holdings and indirect holdings.

(2) The pension fund shall instruct its investment advisors to sell, redeem, divest, or withdraw all direct holdings of restricted companies from the pension fund's assets under management in an orderly and fiduciarily responsible manner within 5 years after the effective date of this amendatory Act of the 104th General Assembly or within 12 months after the company appears on a revised list of restricted companies.

(3) Provisions requiring divestment do not apply to the pension fund's private market funds.

(4) The pension fund may not acquire securities of restricted companies.

(5) For indirect holdings of the pension fund, the Illinois Investment Policy Board shall submit letters to the managers of those investment funds containing restricted companies requesting that they consider removing the companies from the fund or create a similar actively managed fund having indirect holdings devoid of the companies. If the manager creates a similar fund, the pension fund shall replace all applicable investments with investments in the similar fund in an expedited time frame consistent with prudent investing standards. If a similar fund is not created, the pension fund shall:

(A) for investment funds containing restricted companies that are held on the effective date of this amendatory Act of the 104th General Assembly, divest its holdings within 5 years after the effective date of this amendatory Act of the 104th General Assembly;

(B) for investment funds that added a holding in a restricted company after the effective date of this amendatory Act of the 104th General Assembly, divest its holdings within 12 months after the board of the pension fund became aware or was informed that the restricted company was added to the investment fund's holdings; or

(C) for funds that have holdings in companies that are added to the restricted list after the initial list was created, divest its holdings within 12 months after the restricted company was added to the restricted list.

Notwithstanding any provision of this Section to the contrary, a pension fund may cease divestment of any indirect holding if clear and convincing evidence shows that the value of its investments in the prohibited list of fossil fuel companies are equal to or less than 0.05% of the market value of all assets under management by the pension fund. For any cessation of divestment authorized by this subsection, the pension fund shall provide a written notice to the Illinois Investment Policy Board in advance of the cessation of divestment, setting forth the reasons and justification, supported by clear and convincing evidence, for its decision to cease divestment under this subsection.

(g) Pension fund annual report. By April 1 of each year, each pension fund shall provide the Illinois Investment Policy Board with information regarding investments sold, redeemed, divested, or withdrawn in compliance with this Section.

(h) Costs of the Illinois Investment Policy Board. The cost associated with the activities of the Illinois Investment Policy Board under this Section shall be borne by the boards of each pension fund or investment board created under Article 15, 16, or 22A of this Code.

(i) Conflicting statutory and common law obligations. With respect to actions taken in compliance with this Section, including all good faith determinations regarding companies as required by this Section, the pension fund and Illinois Investment Policy Board are exempt from any conflicting statutory or common law obligations, including any fiduciary duties under this Article and any obligations with respect to choice of asset managers, investment funds, or investments for the pension fund's securities portfolios.

(j) Severability. If any provision of this amendatory Act of the 104th General Assembly or its application to any person or circumstance is held invalid, the invalidity of that provision or application does not affect other provisions or applications of this amendatory Act of the 104th General Assembly that can be given effect without the invalid provision or application.

Section 99. Effective date. This Act takes effect upon becoming law.".