wa-law.org > bill > 2025-26 > SB 6304 > Original Bill
It is the intent of the legislature to invest the public funds of Washington state managed by the Washington state investment board in ways that do not conflict with the well-being, stability, and long-term prosperity of Washington's communities. The legislature intends to reduce these conflicts by incorporating a comprehensive and consistent framework to guide the decisions of the board as responsible stewards of the public retirement and trust funds. As many nations, provinces, and states have adopted environmental, social, and governance standards that ensure that public investments reflect fundamental societal values, the legislature intends that Washington state do so in a manner that also ensures that investments under management continue to achieve strong and reliable returns and that safeguards retirement security and the fiscal health of public trust funds.
The state investment board may make appropriate rules and regulations for the performance of its duties. The board shall establish investment policies and procedures designed exclusively to maximize return at a prudent level of risk. However, in the case of the department of labor and industries' accident, medical aid, and reserve funds, the board shall establish investment policies and procedures designed to attempt to limit fluctuations in industrial insurance premiums and, subject to this purpose, to maximize return at a prudent level of risk. The board shall adopt rules to ensure that its members perform their functions in compliance with chapter 42.52 RCW. Rules adopted by the board shall be adopted pursuant to chapter 34.05 RCW.
In assessing a prudent level of risk for investment policies, the board must incorporate responsible investment principles and account for additional inherent risk in companies and investment instruments. For purposes of this section, responsible investment principles include, but are not limited to investments that do not contribute to:
Serious violations of human rights, including forced labor, child labor, or violations of indigenous rights;
Serious violations of the rights of individuals in situations of war or armed conflict, including involvement in the production or sale of weapons that contravene international humanitarian law;
The manufacture or sale of weapons to states engaged in armed conflict where such weapons are used in ways that violate international rules of warfare;
Reputational and other risks posed by operating or providing contractual services for public or for-profit prisons or jails;
Reputational and other risks posed by operating or providing contractual services for immigration detention centers, surveillance of immigrants, deportation of immigrants, or border patrol services;
Gross environmental degradation, including activities that result in severe ecological harm, deforestation, biodiversity loss, or pollution;
Unacceptable greenhouse gas emissions, or acts and omissions that are incompatible with state climate goals or the goal to stay well below two degrees celsius of global warming;
The production of tobacco for recreational use;
Gross corruption, serious financial crimes, or other grave violations of financial integrity;
Restraint of trade, such as price fixing or output restrictions, or collusive behavior including through technology or shared information systems; or
Other particularly serious violations of fundamental ethical norms.
The state investment board shall invest and manage the assets entrusted to it with reasonable care, skill, prudence, and diligence under circumstances then prevailing which a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an activity of like character and purpose.
The board shall:
Consider investments not in isolation, but in the context of the investment of the particular fund as a whole and as part of an overall investment strategy, which should incorporate risk and return objectives reasonably suited for that fund; and
Diversify the investments of the particular fund unless, because of special circumstances, the board reasonably determines that the purposes of that fund are better served without diversifying. However, no corporate fixed-income issue or common stock holding may exceed three percent of the cost or six percent of the market value of the assets of that fund.
In incorporating the responsible investment principles in RCW 43.33A.110, base the decision to invest or exclude a company or investment instrument on current circumstances, and also an assessment of the probability of future violations, the severity and extent of violations, and consider whether other measures might be more effective in reducing the risk of continued harms.
Develop and publish proxy voting guidelines that recognize responsible investment principles as described in RCW 43.33A.110 as both a business and systemic risk, and use ownership authority to mitigate these risks. The proxy voting guidelines must commit the board to use all relevant voting opportunities to support shareholder resolutions that call for entities to reduce violations of responsible investment principles.
The state investment board shall prepare written reports at least quarterly summarizing the investment activities of the state investment board, which reports shall be sent to the governor, the senate ways and means committee, the house appropriations committee, the department of retirement systems, and other agencies having a direct financial interest in the investment of funds by the board, and to other persons on written request. The state investment board shall provide information to the department of retirement systems necessary for the preparation of monthly reports.
At least annually, the board shall report on the board's investment activities for the department of labor and industries' accident, medical aid, and reserve funds to the senate financial institutions and insurance committee, the senate economic development and labor committee, and the house commerce and labor committee, or appropriate successor committees.
At least annually, the board shall report on the board's investment activities for the higher education permanent funds to the house capital budget committee and the senate ways and means committee.
At least annually, the board shall report on the incorporation of the responsible investment principles in RCW 43.33A.110, in particular on the board's process for identifying companies and investment instruments that implicated one or more of the principles, and actions, including in the exercise of proxy voting, that the board has taken to manage the risks associated with the principles to the board's investment portfolio and strategies.