H.F. 721 Section 1. NEW SECTION . 12L.1 Definitions. 1 For purposes of this chapter: 2 1. “Best economic interest” means investment pursuant to the 3 objective of maximizing risk-adjusted investment returns of the 4 participants and beneficiaries of a pension benefit plan over a 5 time horizon consistent with the risk management profile of the 6 plan. 7 2. “Consumer” means a person who is a resident of this state 8 and to which any of the following apply: 9 a. The person has an interest in an investment company, 10 including but not limited to mutual funds and exchange-traded 11 funds, registered with the federal securities and exchange 12 commission that directly or indirectly owns shares of an 13 enterprise regulated by the state. 14 b. The person is a beneficiary of or participant in a 15 pension benefit plan. 16 c. The person has sought or is seeking a relationship with a 17 financial institution for the provision of financial services. 18 3. “Discriminate in the provision of financial services” 19 means to refuse to provide, terminate, or restrict financial 20 services based on an analysis or rating that evaluates any of 21 the following: 22 a. A person’s speech, association, or exercise of religion 23 that is protected from government interference by state or 24 federal law. 25 b. A person’s failure or refusal to adopt a target or make 26 a disclosure related to greenhouse gas emissions beyond what 27 is required by law. 28 c. A person’s failure or refusal to conduct any type of 29 racial, diversity, or gender audit or to provide a preference 30 or benefit based on race, diversity, or gender beyond what is 31 required by law. 32 d. A person’s failure or refusal to assist an employee in 33 obtaining an abortion or gender reassignment services. 34 e. A person’s participation in lawful business associations 35 -1- LSB 2881YH (2) 91 sc/ns 1/ 12

H.F. 721 or activities, including but not limited to those related to 1 fossil fuels, firearms, firearm accessories, or ammunition, 2 except for purposes of a financial institution’s analysis of 3 a person’s quantifiable financial risks based on impartial, 4 financial-based standards established in advance by the 5 financial institution and publicly disclosed to consumers. 6 4. “Economic analysis” means a written analysis 7 demonstrating the factors considered in evaluating the economic 8 impact of a shareholder-sponsored proposal. At a minimum, the 9 analysis must address all of the following factors: 10 a. The subject matter of the shareholder-sponsored proposal. 11 b. An evaluation of the investment company’s stated reasons 12 for opposition to the shareholder-sponsored proposal. 13 c. An evaluation of whether the shareholder-sponsored 14 proposal reflects the investment objectives and risk management 15 profile of the pension benefit plan in which the participants 16 and beneficiaries are invested. 17 d. An evaluation of the economic benefits and costs of 18 implementing the proposal, as written, over a time horizon that 19 reflects the investment objectives and risk management profile 20 of the plan. 21 e. The quantifiable impact of the shareholder-sponsored 22 proposal, as written, on the investment returns of the 23 participants and beneficiaries of the plan. 24 f. An explanation of modeling, procedures, or processes used 25 to complete the economic analysis. 26 5. “Fiduciary” means a person who, with respect to a pension 27 benefit plan, does any of the following: 28 a. Exercises discretionary authority or discretionary 29 control with respect to management of the plan or exercises 30 authority or control with respect to acquisition, management, 31 or disposition of the plan’s assets. 32 b. Renders investment advice for a fee or other 33 compensation, direct or indirect, with respect to moneys or 34 other assets of the plan or has authority or responsibility to 35 -2- LSB 2881YH (2) 91 sc/ns 2/ 12

H.F. 721 do so. 1 c. Has discretionary authority or discretionary 2 responsibility in the administration of the plan. 3 6. “Financial institution” means any of the following: 4 a. A bank that has more than one hundred billion dollars of 5 assets. 6 b. A payment processor, credit card company, credit card 7 network, payment network, payment service provider, or payment 8 gateway that has processed more than one hundred billion 9 dollars in transactions in the previous calendar year. 10 c. An affiliate or subsidiary of an entity described in 11 paragraph “a” or “b” that is owned or controlled by the entity. 12 7. “Financial service” means a financial product or service 13 offered by a financial institution. 14 8. “Investment company” means the same as defined in 15 15 U.S.C. §80a-3. 16 9. “Pension benefit plan” or “plan” means a plan, fund, or 17 program established, maintained, or offered by a public entity, 18 including but not limited to a public retirement system as 19 defined in section 97D.5, if by its terms or as a result of 20 surrounding circumstances the plan, fund, or program does any 21 of the following: 22 a. Provides retirement income or other retirement benefits 23 to employees or former employees. 24 b. Results in a deferral of income by employees for a period 25 extending to the termination of covered employment or beyond. 26 10. “Proxy advisory firm” means a person who is engaged 27 in the business of providing proxy voting advice, research, 28 analysis, ratings, or recommendations to a fiduciary, 29 shareholder, or investor, including institutional investors. 30 11. “Public entity” means the state, political subdivisions 31 of the state, public school corporations, and all public 32 officers, boards, commissions, departments, agencies, and 33 authorities empowered by law to enter into public contracts for 34 the expenditure of public funds, including the state board of 35 -3- LSB 2881YH (2) 91 sc/ns 3/ 12

H.F. 721 regents and institutions under the control of the state board 1 of regents. 2 12. “Shareholder-sponsored proposal” means a proposal 3 submitted to an issuer of securities by a shareholder under 17 4 C.F.R. §240.14a-8. 5 Sec. 2. NEW SECTION . 12L.2 Fiduciary voting 6 responsibilities. 7 1. A fiduciary shall vote all shares held directly 8 or indirectly by, subject to, or on behalf of a pension 9 benefit plan for the benefit of the plan’s participants and 10 beneficiaries solely in the best economic interest of the plan 11 participants and beneficiaries. 12 2. For purposes of this section, with respect to a 13 shareholder-sponsored proposal, there is a rebuttable 14 presumption that a fiduciary votes its shares solely 15 in the best economic interest of the plan participants 16 and beneficiaries if the fiduciary’s vote follows the 17 recommendation of the board of directors of the issuer of the 18 shares, as long as the board includes a majority of independent 19 directors. 20 3. With respect to a shareholder-sponsored proposal, 21 a fiduciary’s vote in a manner inconsistent with the 22 recommendation of the board of directors of the issuer of the 23 shares is presumed to be in the best economic interest of the 24 plan participants and beneficiaries if any of the following 25 criteria are met: 26 a. The fiduciary conducts and documents an economic analysis 27 demonstrating that such a vote is in the best economic interest 28 of the plan participants and beneficiaries. 29 b. On behalf of the fiduciary, a third party conducts and 30 documents an economic analysis demonstrating that such a vote 31 is in the best economic interest of the plan participants 32 and beneficiaries, and the fiduciary determines that the 33 economic analysis adequately demonstrates that such a vote is 34 in the best economic interest of the plan participants and 35 -4- LSB 2881YH (2) 91 sc/ns 4/ 12

H.F. 721 beneficiaries. 1 4. A fiduciary shall not vote in a manner that does any of 2 the following: 3 a. Subordinates the economic interest of the plan’s 4 participants and beneficiaries to any environmental, social, 5 policy, governance, or ideological goal. 6 b. Promotes any environmental, social, policy, governance, 7 or ideological goal, unless, based on an economic analysis, it 8 is determined that the vote is in the best economic interest of 9 the plan participants and beneficiaries. 10 5. With respect to shareholder-sponsored proposals, a 11 fiduciary shall annually disclose in a report to the treasurer 12 of state all of the following: 13 a. Each vote that was inconsistent with the recommendation 14 of an issuer’s board of directors composed of a majority of 15 independent directors. 16 b. The economic analysis conducted and documented with 17 respect to each vote described in subsection 3 to determine 18 that the vote was in the best economic interest of the plan’s 19 participants and beneficiaries. 20 6. The report required under subsection 5 must be certified 21 by the chief executive officer and chief financial officer, or 22 an individual acting in each capacity, of the fiduciary. 23 7. At least once every three years, a fiduciary shall 24 back test its economic analysis to ensure that the models, 25 procedures, and processes it uses predict the best economic 26 interest of the plan’s participants and beneficiaries, and 27 shall deliver a report detailing such back testing to the 28 treasurer of state. Based on such back testing, the chief 29 executive officer and chief financial officer, or an individual 30 acting in each capacity, of the fiduciary shall certify that 31 the economic analysis performed by the fiduciary and included 32 in the report is effective. 33 8. The court may award court costs and reasonable attorney 34 fees to a party who prevails in an action brought under this 35 -5- LSB 2881YH (2) 91 sc/ns 5/ 12

H.F. 721 section. 1 Sec. 3. NEW SECTION . 12L.3 Proxy advisory firms. 2 1. A proxy advisory firm shall not provide proxy voting 3 advice with respect to shareholder-sponsored proposals 4 submitted to any enterprise that the state regulates, unless 5 the proxy advisory firm bases its voting recommendations 6 solely on the best economic interests of the enterprise’s 7 shareholders. 8 2. For purposes of this section, with respect to a 9 shareholder-sponsored proposal submitted to an enterprise 10 regulated by the state, there is a presumption that a proxy 11 advisory firm’s voting recommendation is based solely on the 12 best economic interest of the enterprise’s shareholders if 13 the recommendation follows the recommendation of the board of 14 directors of the issuer of the shares, as long as the board 15 includes a majority of independent directors. 16 3. With respect to a shareholder-sponsored proposal 17 submitted to an enterprise regulated by the state, a proxy 18 advisory firm may recommend a vote that is inconsistent with 19 the recommendation of the board of directors of the issuer of 20 the shares if the proxy advisory firm conducts and documents an 21 economic analysis demonstrating that such a vote is in the best 22 economic interest of the enterprise’s shareholders. 23 4. With respect to shareholder-sponsored proposals 24 submitted to an enterprise regulated by the state, a proxy 25 advisory firm shall annually disclose in a report to the 26 treasurer of state all of the following: 27 a. Each vote recommendation that was inconsistent with the 28 recommendation of an issuer’s board of directors composed of a 29 majority of independent directors. 30 b. The economic analysis conducted and documented with 31 respect to each vote recommendation described in subsection 32 3 to determine that the vote recommendation was in the best 33 economic interest of the regulated enterprise’s shareholders. 34 Sec. 4. NEW SECTION . 12L.4 Consumer right to disclosure. 35 -6- LSB 2881YH (2) 91 sc/ns 6/ 12

H.F. 721 1. a. If a consumer has reason to believe that the 1 requirements of section 12L.2 or 12L.3 have not been met, a 2 consumer may submit a request to any of the following to obtain 3 a copy of the documented economic analysis demonstrating that 4 such a vote is solely in the best economic interest of the 5 consumer: 6 (1) The investment company that owns shares of an enterprise 7 regulated by the state. 8 (2) The pension benefit plan, in each case, in which the 9 consumer is an investor, beneficiary, or participant. 10 b. There is a presumption that a vote is solely in the 11 best economic interest of the consumer if the vote follows the 12 recommendation of the board of directors of the issuer of the 13 shares, as long as the board includes a majority of independent 14 directors. 15 2. a. The investment company or plan shall respond in 16 writing to the consumer within ninety days of receipt of 17 a request described in subsection 1 by doing one of the 18 following: 19 (1) Providing the consumer with the requested economic 20 analysis. 21 (2) Informing the consumer that no economic analysis is 22 available, if the investment company did not conduct and 23 document an economic analysis. 24 (3) Informing the consumer that the vote at issue was 25 consistent with the recommendation of the board of directors 26 of the issuer of the shares and such board is composed of a 27 majority of independent directors. 28 b. The investment company or plan shall provide information 29 in response to a consumer request at no cost up to twice 30 annually per consumer. 31 Sec. 5. NEW SECTION . 12L.5 Prohibition on discrimination. 32 1. A financial institution shall not discriminate in 33 the provision of financial services or agree, conspire, or 34 coordinate to do so. 35 -7- LSB 2881YH (2) 91 sc/ns 7/ 12

H.F. 721 2. If a financial institution refuses to provide, 1 restricts, or terminates service to a consumer, the consumer 2 may submit a request for a written statement of the specific 3 reasons for the decision by telephone, mail, or electronic 4 mail within ninety days of receiving notice of the decision. 5 Unless otherwise prohibited by law, the financial institution 6 shall transmit the written statement within fourteen days of 7 receiving the consumer’s request. The statement must include 8 all of the following: 9 a. A detailed explanation of the basis for the denial, 10 restriction, or termination of service. 11 b. A copy of the terms of service agreed to by the consumer 12 and the financial institution. 13 c. A citation of the specific provisions of the terms of 14 service on which the financial institution relied to deny, 15 restrict, or terminate service. 16 3. A consumer who has been discriminated against by a 17 financial institution may bring an action to recover damages 18 or seek an injunction. 19 Sec. 6. NEW SECTION . 12L.6 Enforcement. 20 1. This chapter may be enforced by the attorney general. 21 2. If the attorney general has reasonable cause to believe 22 that a person has engaged in, is engaging in, or is about to 23 engage in a violation of this chapter, the attorney general may 24 do any of the following: 25 a. Require the person to file on forms prescribed by the 26 attorney general a statement or report in writing, under oath, 27 as to all the circumstances surrounding the actual, alleged, or 28 potential violation and such other data and information as the 29 attorney general deems necessary. 30 b. Examine under oath any person in connection with the 31 actual, alleged, or potential violation. 32 c. Examine any record, book, document, account, or paper as 33 the attorney general deems necessary. 34 d. Issue civil investigatory demands consistent with 35 -8- LSB 2881YH (2) 91 sc/ns 8/ 12

H.F. 721 investigation into a potential enforcement action. 1 e. Under an order of the district court, impound any record, 2 book, document, account, paper, or sample or material relating 3 to the actual, alleged, or potential violation and retain the 4 same in the attorney general’s possession until the completion 5 of all proceedings undertaken under this chapter or in court. 6 3. The attorney general may initiate an action in the 7 name of the state and may seek an injunction to restrain 8 any violations of this chapter. A violation of this chapter 9 shall constitute irreparable harm. Each share voted by a 10 fiduciary that is not voted in the best economic interest of 11 the shareholder constitutes a separate violation. The attorney 12 general may also seek civil penalties for each violation under 13 this chapter. All civil penalties issued shall be in equity. 14 Civil penalties shall not exceed one thousand dollars per 15 violation. Civil penalties collected under this chapter shall 16 be deposited in the general fund of the state. 17 Sec. 7. Section 97A.7, subsection 1, Code 2025, is amended 18 to read as follows: 19 1. The board of trustees shall be the trustees of the 20 retirement fund created by this chapter as provided in section 21 97A.8 and shall have full power to invest and reinvest funds 22 subject to the terms, conditions, limitations, and restrictions 23 imposed by subsection 2 and chapters 12F , 12H , 12J , and 12K , 24 and 12L and subject to like terms, conditions, limitations, 25 and restrictions said trustees shall have full power to hold, 26 purchase, sell, assign, transfer, or dispose of any of the 27 securities and investments of the retirement fund which have 28 been invested, as well as of the proceeds of said investments 29 and any moneys belonging to the retirement fund. The board 30 of trustees may authorize the treasurer of state to exercise 31 any of the duties of this section . When so authorized the 32 treasurer of state shall report any transactions to the board 33 of trustees at its next monthly meeting. 34 Sec. 8. Section 97B.4, subsection 5, Code 2025, is amended 35 -9- LSB 2881YH (2) 91 sc/ns 9/ 12

H.F. 721 to read as follows: 1 5. Investments. The system, through the chief investment 2 officer, shall invest, subject to chapters 12F , 12H , 12J , and 3 12K , and 12L and in accordance with the investment policy and 4 goal statement established by the board, the portion of the 5 retirement fund which, in the judgment of the system, is not 6 needed for current payment of benefits under this chapter 7 subject to the requirements of section 97B.7A . 8 Sec. 9. Section 97B.7A, subsection 1, Code 2025, is amended 9 by adding the following new paragraph: 10 NEW PARAGRAPH . d. Prioritize the best economic interest of 11 the system’s participants and beneficiaries in accordance with 12 chapter 12L. 13 Sec. 10. Section 262.14, unnumbered paragraph 1, Code 2025, 14 is amended to read as follows: 15 The board may invest funds belonging to the institutions, 16 subject to chapters 12F , 12H , 12J , and 12K , and 12L and the 17 following regulations: 18 EXPLANATION 19 The inclusion of this explanation does not constitute agreement with 20 the explanation’s substance by the members of the general assembly. 21 This bill requires a fiduciary to vote all shares of a 22 pension benefit plan established, maintained, or offered by 23 a public entity solely in the best economic interest of the 24 plan participants and beneficiaries. The bill creates the 25 rebuttable presumption that, if a fiduciary’s vote aligns with 26 the recommendation of the board of directors of the issuer 27 of the shares or if the fiduciary or a third party conducts 28 and documents an economic analysis showing that the vote is 29 in the best economic interest of the plan participants and 30 beneficiaries, the vote is in the best interest of the plan 31 participants and beneficiaries. The bill prohibits a fiduciary 32 from voting shares of a plan based on any environmental, 33 social, policy, governance, or ideological goal that is 34 not in the best economic interest of plan participants and 35 -10- LSB 2881YH (2) 91 sc/ns 10/ 12

H.F. 721 beneficiaries. 1 The bill requires a fiduciary to annually report to 2 the treasurer of state any vote inconsistent with the 3 recommendation of an issuer’s board of directors and the 4 economic analysis on which the fiduciary relied. This report 5 must be certified by the fiduciary’s chief executive officer 6 and chief financial officer. 7 The bill also requires a fiduciary to review its economic 8 analysis every three years to ensure that the fiduciary’s 9 models, procedures, and processes predict the best economic 10 interest of the plan participants and beneficiaries. 11 The bill permits a court to award court costs and reasonable 12 attorney fees to the prevailing party in a suit concerning 13 fiduciary voting responsibilities under the bill. 14 The bill prohibits a proxy advisory firm from providing 15 proxy voting advice regarding shareholder-sponsored proposals 16 to an entity that the state regulates unless the advice is 17 based solely on the best economic interests of the enterprise’s 18 shareholders. If a proxy advisory firm’s advice follows the 19 recommendation of the board of directors of the issuer of the 20 shares or if the proxy advisory firm conducts and documents an 21 economic analysis demonstrating that the vote is in the best 22 economic interest of the plan participants and beneficiaries, 23 then the advice is presumed to be based solely on the best 24 economic interest of the enterprise’s shareholders. A proxy 25 advisory firm must submit an annual report to the treasurer of 26 state disclosing any vote inconsistent with the issuer’s board 27 of directors’ recommendations and the economic analysis on 28 which the proxy advisory firm relied. 29 The bill permits an investor, beneficiary, or participant of 30 a plan to submit a request for the economic analysis conducted 31 for a fiduciary’s vote to the investment company that owns 32 shares of an enterprise regulated by the state or the plan if 33 the individual has reason to believe the provisions of the bill 34 have not been met. The investment company or plan must respond 35 -11- LSB 2881YH (2) 91 sc/ns 11/ 12

H.F. 721 in writing within 90 days by providing the requested economic 1 analysis or informing the individual that no economic analysis 2 was conducted or the vote aligned with the recommendation 3 of the board of directors of the issuer of the shares. The 4 investment company or plan must provide such a response without 5 cost up to twice annually per consumer. 6 The bill prohibits a financial institution from refusing to 7 provide, terminating, or restricting financial services based 8 on certain nonfinancial factors. If a financial institution 9 refuses to provide, terminates, or restricts financial 10 services, a consumer may request within 90 days a written 11 statement of the specific reasons for the decision, which the 12 financial institution must provide within 14 days. A person 13 who is discriminated against by a financial institution may 14 bring an action to recover damages or seek an injunction. 15 The bill allows the attorney general to investigate any 16 suspected violations of the bill and to enforce the bill’s 17 provisions by initiating an action in the name of the state 18 and seeking civil penalties for each violation. Each share 19 not voted in the best economic interest of the shareholder 20 qualifies as a separate violation and constitutes irreparable 21 harm. The bill requires civil penalties to be in equity and 22 to not exceed $1,000 per violation. Civil penalties collected 23 under the bill are deposited in the general fund of the state. 24 The bill makes conforming changes. 25 -12- LSB 2881YH (2) 91 sc/ns 12/ 12