Senators Jeff Merkley (D-OR) and Maggie Hassan (D-NH) this month asked the Government Accountability Office (GAO) to look into the risks that fossil fuel investments pose for federal workers regarding climate change.
The Thrift Savings Plan (TSP), which is a 401k equivalent available to federal employees, is one of the largest defined contribution plans in the world, with more than 5 million participants and over $500 billion in assets.
According to a statement on Merkley’s website, “despite the clear investment risks that fossil fuel stocks currently present, the federal government has no options for its workers to divest from fossil fuel companies in their TSP retirement accounts”.
“Detailed analyses by the Environmental Protection Agency, the Intergovernmental Panel on Climate Change, and other scientific organizations have identified the serious consequences of climate change and the resulting financial risk for retirement plans,” the senators wrote in a letter to GAO head Gene Dodaro. “As a result, some of the world’s largest asset managers have prioritized climate risk disclosures in their engagement strategies.
“Furthermore, over the past 10 years, the traditional energy sector’s performance has become increasingly poor, reducing the energy sector’s share in global market capitalization. From 2007 to 2014, the energy earnings per share (EPS) contribution to the S&P500 have dropped approximately 50 percent, and investors are losing money as a result. One analysis found that the New York State Common Retirement Fund, the nation’s third-largest pension fund, would have been $22 billion richer had it divested from fossil fuels 10 years ago.”
The senators note in the letter that while markets throughout the world are moving to incorporate the risks associated with climate change and fossil fuel investments, the TSP appears to not be addressing the issue.
“This inaction places the assets and retirement security of its participants in jeopardy,” concluded the senators.
The Senators asked Dodaro for the GAO to respond to the following questions:
1. What is known about the exposure of TSP’s investment portfolio to risks from climate change?
2. What steps, if any, have TSP and the Federal Retirement Thrift Investment Board taken to address risks from climate change?
3. What have defined contribution plans in other nations with investment options similar to TSP (such as those in the U.K. and Hong Kong) done to address investment risks from climate change? What have they done to communicate this information to participants?
4. How have TSP’s fossil fuel holdings performed over the past decade? How would TSP’s overall financial performance differed without fossil fuels?
The full text of the letter is available here.