The easy climate-change win that Rashida Tlaib backs but Joe Biden is failing to seize
The president could facilitate one of the world's biggest fossil fuel divestments—but he's dragging his feet.
The Biden administration has signaled its commitment to tackling the financial risks posed by climate change through executive orders and key appointments. But advocates say the president is missing an easy opportunity for big climate progress: divesting the Thrift Savings Plan (TSP), the federal employee pension fund.
The TSP is the largest defined contribution plan in the world, with assets worth nearly $700 billion. It has also steadfastly refused to embrace the growing trend of pensions divesting from fossil fuels, since its governing body, the Federal Retirement Thrift Investment Board (FRTIB) says it does not have the authority to divest from fossil fuel assets.
But other public pension funds have done exactly that. In June, Maine became the first state to order its public pension funds, worth about $17 billion, to divest from fossil fuels through legislation. Earlier this year, three New York City pension funds announced that they would be divesting about $4 billion worth of assets following years of activist pressure. headtopics.com
Joe Biden fails to seize an easy climate-change win. President Biden listens during a virtual meeting in the Eisenhower Executive Office Building on July 30, 2021 in Washington.Anna Moneymaker/Getty ImagesFederal employees and lawmakers are now escalating a campaign to pressure the FRTIB to divest from fossil fuels, arguing that it is the board's fiduciary duty to do so. Their demands were aided in recent weeks by a new report from the Government Accountability Office (GAO), which concluded the board was exposing the fund to financial risks by not assessing the impact of climate change.
PresidentJoe Bidencould take matters into his own hands. Here's how.Currently, one seat on the five-member FRTIB is vacant and four seats are occupied by Obama appointees serving expired terms. That means Biden could fill all five seats with nominees committed to divesting from fossil fuels. Due to a special statute governing appointments to the board, the nominations could be completed within a couple of weeks.
So far, however, Biden has been dragging his feet on the issue—puzzling those who see this as an easy and important climate victory, since TSP would be the biggest pension fund in the world to divest from fossil fuels."It would revolutionize thinking on divestment for the rest of the country," Nicole Cantello, an Environmental Protection Agency attorney and president of the American Federation of Government Employees (AFGE) Local 704, told The Daily Poster. She added that the TSP"is the biggest single-investor plan in the nation, so it would be the big one—it would set a precedent across the country, it would provide leadership throughout the nation for other plans to divest."
Financial risksIn 2019, Sens. Jeff Merkley (D-Ore.) and Maggie Hassan (D-N.H.) commissioned a report from the Government Accountability Office (GAO) investigating the risks posed to the TSP by climate change.The GAO released its report this June, concluding that the TSP's passive investment strategy exposed it to climate-related financial risks. Moreover, it found"in managing the TSP, the FRTIB has not explicitly assessed the potential financial impact of climate change on the $700 billion in assets it manages for 6 million active and retired federal workers." headtopics.com
According to the GAO report,"FRTIB officials told us that beyond monitoring whether TSP's core funds are tracking their respective target indices, they cannot take actions to adjust TSP's holdings or investment strategies in response to specific investment risks... The officials said that if they found a particular company to be at heightened risk from climate change, they could not change how any of TSP's funds are invested in that company to account for the risk."
That position has alarmed federal employees and climate policy experts.Cantello, the AFGE local president, recently pressed Hassan and Merkley to review the FRTIB's claim that it didn't have the authority to divest."The recent comments of the FRTIB leadership expose an ideological bent that is more dangerous to federal employee retirement savings than divestment from climate risk could ever be," Cantello wrote in a letter dated July 13.
She added:"The FRTIB, by law, is supposed to act in the sole fiduciary interests of their 6.2 million participants. FRTIB officials told the GAO that they are so constrained by law that they must institute a passive investment strategy that may not take into account climate risk. We ask that you protect federal employees from this view and do an independent survey of the FRTIB's legal authority."
Steven Rothstein, managing director of Ceres Accelerator for Sustainable Capital Markets, said that it is the FRTIB's duty as a fiduciary to consider climate risk."The fact that there are federal workers' portfolios, roughly $700 billion of hard-earned money, and they haven't looked at climate risk is irresponsible," Rothstein told The Daily Poster. headtopics.com
"If this fund had divested from fossil fuels 10 years ago, the returns would have been higher, retirees would have been better off," he said, citing studies showing that funds without fossil fuels have outperformed those with fossil fuels.Biden has taken aim at the TSP's investment strategy. In May, before the GAO report was released, Biden had issued an executive order directing the Department of Labor to review its authority under the Federal Employees' Retirement System Act, which set up the TSP, to"protect the life savings and pensions of United States workers and families from the threats of climate-related financial risk" and assess the extent to which the TSP"has taken environmental, social, and governance factors, including climate-related financial risk, into account."
But federal employees and retirees say Biden needs to go further.Cantello helped organize a petition with other federal employees calling on the Biden administration to divest the TSP from fossil fuels and appoint members to the FRTIB who"(a) understand that climate risk is a systemic risk to financial markets, and (b) will require the asset managers for the Thrift Savings Plan to support shareholder resolutions on climate change mitigation and deforestation." The petition currently has more than 500 signatures.
Filling the FRTIB with board members committed to divestment could be done in a matter of weeks. Unlike most federal boards, there is no requirement that the board be bipartisan. Moreover, appointments are governed by a special statute that doesn't require senate hearings for nominees.
Cantello acknowledged that the appointment process is slow, and other key administrative positions also remain unfilled. But, she added, appointing divestment advocates to the FRTIB would be one of the fastest ways for the Biden administration to take bold action on climate change.
Legislative PressureLegislative attempts to divest the TSP from fossil fuels have been held up by the GOP in the past, butDemocratsmight now have a better opportunity to make it happen.Merkley and Hassan, as well as Reps. Rashida Tlaib (D-Mich.) and Emanuel Cleaver (D-Mo.) in the House, have introduced legislation for the third year in a row that would require the fund to assess the risks posed by climate change.Read more: Newsweek »
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Saved you a [baited] click: Divesting fed pensions from fossil fuel companies. While easy enough to do, I can see why Biden would rather focus on building and investing in the future rather than attacking the juggernauts of the past.
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