Politics, Fossil Fuel and the TSP

In its last report, the federal government’s Thrift Savings Plan (TSP) had a balance of almost $578 billion. That is a lot of money.

To some, that money could be used in ways that to help society or save our planet while sitting on the accounting sheets of the federal government waiting for federal employees to use after they retire.

For some federal employees, they would agree that using the TSP to further the social and political objectives of some in Congress is desirable. Others would disagree about creating or using TSP funds to further social or political objectives.

For all federal employees investing in the TSP, a primary goal is likely to be keeping their investment money relatively safe and continuing to grow so they will have that money to finance their retirement.

Politics and the TSP

Your TSP funds are currently invested in a way that is generally free from the political agenda of our elected representatives.

The TSP board has done a good job of keeping the TSP plan invested in low-cost index funds. The plan as structured and implemented has resulted in the TSP being cited by national publications as an excellent retirement plan.

Prior Efforts to Modify the TSP

Prior attempts to use the TSP to advance social change or political objectives have included:

• The “Federal Employee Socially Responsible Investment Act”;
• Using actively managed funds instead of index funds to give companies run by women and minorities a chance to earn fees from the TSP;
• Creating “terror-free international investment options” in the TSP;
•  Creating a TSP fund to ensure gender diversity and empowerment 

The Rise Act of 2019 is the latest bill to “improve” the TSP. This bill has been proposed by Oregon’s Senator Jeff Merkley (D-OR).

Avoiding Stocks Relating to Fossil Fuels

The Senator’s press release describes the Retirement Investments for a Sustainable Economy (RISE) Act of 2019. The bill, according to Senator Merkley, “gives federal employees the ability to divest from the fossil fuel industry—and reduce the financial liability of fossil fuel asset losses—by offering a Climate Choice investment option for the Thrift Savings Plan (TSP).”

The Senator writes that “Creating a fossil-fuel free option would not only allow TSP participants the ability to align their retirement investments with their values; it could also help participants mitigate their own financial risks. As the climate threat grows and more and more of the world transitions to clean and renewable energy, holding shares in fossil fuel companies may risk bigger and bigger losses for investors.”

The press release cites comments from different interest groups to the effect that “Fossil fuel stocks are underperforming and volatile, an increasingly risky bet. The RISE Act will give federal workers a chance to protect their pensions against the looming carbon bubble — all while protecting the planet.”

How It Would Protect the Planet

The bill would create a Climate Choice Stock Index Fund. The stocks in the fund would be selected to “ensure that no investment in the portfolio is an investment with respect to a fossil fuel entity.”

Senator Merkley introduced a similar bill last year that would have created a “Climate Choice Stock Index Fund.” It did not advance beyond the Senate Homeland Security and Governmental Affairs Committee.