One Congressman has had enough of “woke ESG funds” and has introduced a bill to prohibit the Thrift Savings Plan from allowing federal employees and retirees from investing their money in environmental, social and governance (ESG) investments.
Congressman Chip Roy (R-TX) is the lawmaker who introduced the bill. The No ESG at TSP Act (H.R. 7896) would do exactly what its title suggests: it would prohibit the TSP from allowing participants to invest their retirement savings into funds that make investment decisions based on environmental, social, governance, or political criteria.
According to Roy, “ESG investing is a woke scam. It restricts the free flow of capital, undermines U.S. energy freedom to the benefit of our enemies, and advances woke racial and gender ideologies intent on dividing the republic. The upcoming changes to TSP would allow billions of taxpayer dollars to serve these ends. The federal government shouldn’t have any part in this radical nonsense, and especially shouldn’t be using your money to do it.”
His comments are in reference to the new TSP mutual fund window that is launching this month which will give federal employees access to thousands of mutual funds in which they can invest some of their total TSP investment portfolios into, albeit for much higher fees than they currently pay for the core TSP funds. Presumably, there will be ESG mutual funds somewhere in the mix of all of the available funds in which a federal employee or retiree could invest some of his or her retirement savings.
Politics and the TSP
The TSP has managed to remain largely free from political influence throughout its existence, but that doesn’t mean that there have not been lawmakers who want to use the TSP to advance their political causes.
Roy’s bill is directly in contrast to some past legislative proposals that have come out of Congress to use the TSP as a means to save the environment and fight climate change.
One of these proposals was from Senator Jeff Merkley (D-OR). In 2019, he introduced the Retirement Investments for a Sustainable Economy (RISE) Act to give “…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).” It was not the first time he had introduced a bill with that type of agenda.
Lawmakers behind a similar bill introduced last year wanted to use the TSP to fight climate change by requiring the Federal Retirement Thrift Investment Board (FRTIB) to conduct a thorough examination of the financial risks posed by climate change and to potentially divest the TSP from “corporate polluters.”
The White House has even gotten involved when President Biden issued an Executive Order last year which assumes that the TSP will be harmed by climate change. The Executive Order concerns “the global shift away from carbon-intensive energy sources and industrial processes present(ing) transition risk” while also providing “generational opportunities to enhance U.S. competitiveness and economic growth, while also creating well-paying job opportunities for workers.”
On the other side of the political aisle, Republican lawmakers have been just as concerned about how TSP funds are invested. There has been an ongoing push to prohibit the TSP from investing federal employees’ retirement savings into Chinese companies that they believe pose a security threat to the United States.
The FRTIB eventually delayed its plans to move forward with the change to the I Fund that would have allowed the Chinese investments, notably after the Trump administration got involved, but more recently it has come up again with concerns that new FRTIB board members may resume plans and efforts to make the change to the underlying I Fund index.
The most recent incident related to the Chinese investments came when a group of six Republican Senators asked the FRTIB to cancel or delay the new TSP mutual fund window over security concerns posed by TSP investments in Chinese companies.
Russia was not overlooked either. After Russia invaded Ukraine, there was a bill introduced to prohibit the TSP from ever investing in Russian companies, although there currently are not any Russian companies in the index tracked by the I Fund.
How all of these legislative proposals and political battles involving the TSP will ultimately play out is anybody’s guess, but federal employees can remain fairly confident that members of Congress will always be eyeing the TSP for political reasons.