Lawmakers Want Feds to Have Socially Responsible Retirement Investment Options

Federal employees and retirees should be able to invest their retirement savings in socially responsible companies, according to a new bill proposed by a group of Democratic lawmakers.

The Federal Employees Responsible Investment Act, sponsored by Rep. Jim Langevin, D-R.I., in the House and Sen. Sheldon Whitehouse, D-R.I., in the Senate, would require officials who administer the Thrift Savings Plan to create a “corporate responsibility index” as an option in which TSP participants could invest.

“I strongly believe that federal workers should be able to invest in companies that demonstrate a commitment to sound environmental, social and governance practices,” Langevin said. “This legislation would allow federal employees to feel good about their investments, and would encourage companies to implement socially responsible and environmentally sustainable policies and practices.”

A 2012 Government Accountability Office report , however, found adding such an option would not provide any long-term benefit to the TSP. While the socially responsible investments would offer the short-term advantage of providing participants “an opportunity to invest in accordance with their values,” GAO said other benefits were “unknown” and the option would not provide any additional portfolio diversification.

Meg Fraser, a spokeswoman for Langevin, noted the GAO report also showed a hypothetical corporate responsibility offering would have outperformed at least one current TSP fund, and would have performed only marginally worse than several others.

The board that oversees the federal retirement plan has not embraced previous attempts to regulate TSP investments to better align with social and moral concerns. The Federal Retirement Thrift Investment Board has said bills such as the 2007 Iran Sanctions Enabling Act -- introduced by then-Sen. Barack Obama to require divestiture of companies that do business in countries supporting genocide and terror -- would not be in the best interest of participants.

"As the board members, we are responsible only for the participants' best interest, not for the best interest of the United States," Andrew Saul, then-chairman of the board, said at the time. "You're not wearing the hat of a United States citizen; you're wearing the hat of a fiduciary for the plan."

Fraser said Langevin’s office will “continue to have discussions with TSP officials regarding their concerns." Despite what apprehension may persist, Whitehouse said federal employees should have the opportunity to use their collective voice for good.

“Across America, more and more people are calling on institutions to use their investments to send the message that they do not support big polluters, and that they care about issues like climate change,” Whitehouse said. “This legislation will allow millions of federal government employees and retirees to send that same message -- to use the power of their individual purse to tell big polluters they can’t keep poisoning our air and water without consequences.”

In addition to companies with positive environmental records, Whitehouse and Langevin’s corporate responsibility index would invest in businesses with strong workplace relations, a commitment to community involvement and a demonstrated respect for human rights.