This bill creates a new legislative intent section and amends existing law governing the Washington State Investment Board (amending RCW 43.33A.110, 43.33A.140, and 43.33A.150). It requires the board to incorporate a defined set of "responsible investment principles" into its assessment of a prudent level of risk while continuing to authorize investment policies designed to maximize return at a prudent level of risk. It also restates the board’s duty of reasonable care, skill, prudence, and diligence and explicitly requires board members to comply with chapter 42.52 RCW and for rules to be adopted under chapter 34.05 RCW. The bill adds concrete procedural and portfolio limits: no corporate fixed-income issue or common stock holding may exceed 3 percent of cost or 6 percent of market value of a fund’s assets; the Department of Labor and Industries’ accident, medical aid, and reserve funds retain a distinct statutory purpose to attempt to limit premium fluctuations; and the board must develop and publish proxy voting guidelines that treat the listed responsible investment principles as business and systemic risks and use voting authority to mitigate those risks. It requires quarterly written reports summarizing investment activities to specified officials and agencies, monthly information provision to the Department of Retirement Systems, and multiple annual reports to specified legislative committees, including an annual report on how the responsible investment principles were identified and acted upon (including proxy voting). The responsible investment principles are listed by example and include investment practices that do not contribute to serious human rights violations, serious rights violations in war or armed conflict, production or sale of certain weapons, severe environmental degradation or unacceptable greenhouse gas emissions relative to stated climate goals, tobacco production for recreational use, substantial coal production or coal-generated power by a company (10 percent revenue threshold), reputational risks from prisons or immigration detention services, gross corruption or serious financial crimes, and restraint of trade or collusive behavior. The text provided does not include an effective date, enforcement penalties or oversight mechanisms beyond reporting, nor operational definitions or measurement methods for many of the listed principles (other than the coal revenue threshold and the diversification percentages), so how the board must measure probability, severity, and extent of future violations or what specific metrics to apply is not specified here.

If enacted, the state investment board would be required to incorporate named "responsible investment" considerations into how it defines prudent risk and makes investment and exclusion decisions, commit to using proxy votes to press companies to reduce violations, and operate with new diversification caps (no corporate fixed-income issue or common stock holding over 3% of cost or 6% of market value). The board must also provide written quarterly summaries of investment activity to the governor, several legislative committees and affected agencies, supply monthly information to the Department of Retirement Systems, and produce annual reports for the Labor and Industries funds and higher education permanent funds describing how it identifies companies implicated by the principles and what actions (including proxy votes) it has taken. The most affected actors are the state investment board (facing new analysis, engagement, voting and reporting responsibilities and ethics/ rulemaking compliance), the Department of Labor and Industries’ accident, medical aid, and reserve funds (which retain a specific mandate to limit premium volatility), the Department of Retirement Systems, higher education permanent funds, and companies in sectors named by the principles (e.g., coal, tobacco, weapons, prisons, immigration detention, severe environmental harm), which may face reduced investment or increased shareholder pressure. The changes will likely increase the board’s administrative and compliance costs and constrain some investment options, which can shift portfolio risks and returns depending on how exclusions or engagements are actually applied; key implementation details such as measurement methods, thresholds for many principles, enforcement, and the bill’s effective date are not specified in the provided text.