$500bn Federal Thrift Savings Plan pressed to assess climate risk as Trump rounds on ESG

The Federal Thrift Savings Plan (TSP), a defined contribution plan for US civil service and army employees, is under political pressure from the Democrats to assess the climate risk of its $500bn under management.

Democratic senators Jeffrey Merkley (Oregon) and Margaret Wood Hassan (New Hampshire) have written to the Government Accountability Office (GAO), asking it to examine the TSP’s exposure to climate risk.

They cite a report the GAO wrote last year that found few retirement plans in the US incorporate ESG factors into their investments. It called on the Department of Labor (DoL) to provide clearer information on ESG factors and material risks for fiduciaries.

The report, Retirement Plan Investing: Clearer Information on Consideration of Environmental Social and Governance Factors Would Be Helpful, also says some retirement plans have taken actions to assess climate risks. But this is mainly defined benefit plans sponsored by state and local governments.

In their letter, the senators say that while markets are moving on risks associated with climate change, the Washington DC-based TSP “appears to be ignoring the issue completely”.

“This inaction places the assets and retirement security of its participants in jeopardy,” they say.They call on the GAO to examine a number of areas, including the exposure of TSP’s investment portfolio to risks from climate change and how TSP’s fossil fuel holdings have performed over the past decade.

It comes as President Trump has issued an executive order requiring the DoL to see whether pension funds engaging with energy companies on ESG issues are in compliance with the Employee Retirement Income Security Act (ERISA), the federal law governing retirement plans.

The order states that “companies owe a fiduciary duty to their shareholders to strive to maximize shareholder return, consistent with the long-term growth of a company.”

It also looks at proxy voting, calling on the Labor secretary to review guidance on proxy voting “to determine whether any such guidance should be rescinded, replaced or modified to ensure consistency with current law and policies that promote long-term growth and maximize return on ERISA plan assets”.

Sustainability advocacy group Ceres branded the executive order “misguided” and that it “ignores the very clear information related to the financial risks of climate change”.

See RI coverage of the DoL here.