Bill Overview
Title: No ESG at TSP Act
Description: This bill prohibits investments under the Thrift Savings Plan in mutual funds that are based on environmental criteria (e.g., emissions standards), social criteria (e.g., company diversity), political criteria (e.g., political affiliations), or corporate governance criteria that differ from the standards that currently apply under law.
Sponsors: Rep. Roy, Chip [R-TX-21]
Target Audience
Population: Federal employees and members of the uniformed services with TSP accounts
Estimated Size: 6200000
- The Thrift Savings Plan (TSP) is a retirement savings and investment plan for federal employees and members of the uniformed services, including the Ready Reserve.
- As of 2021, there were approximately 6.2 million individuals with accounts in the TSP.
- The bill focuses on prohibiting types of investments based on ESG criteria within the TSP, affecting those who might choose such funds.
- While not every TSP account holder opts for ESG-related investments, those who do will see their options reduced.
- The impact will be directly on investment choices, which could affect long-term returns depending on the performance of excluded ESG funds.
Reasoning
- The majority of TSP account holders are likely not heavily invested in ESG funds, as these are a relatively new option in retirement planning.
- We should expect the major impact of the policy on those who actively choose ESG funds for ethical or performance reasons, a minority in the general TSP account holder population.
- Some federal employees and military members might see no direct impact on their wellbeing since they do not utilize ESG options in their retirement strategies.
- The effect on wellbeing for the affected individuals will largely depend on their financial priorities and how they perceive the role of ESG factors in long-term investment returns.
- Consider the demographic diversity within federal employees, including variations in investment literacy and priorities, which could lead to varied responses.
Simulated Interviews
Environmental Policy Analyst (Washington D.C.)
Age: 34 | Gender: female
Wellbeing Before Policy: 8
Duration of Impact: 20.0 years
Commonness: 3/20
Statement of Opinion:
- I prioritized ESG options in my TSP because I believe in supporting sustainable and ethical companies.
- This change feels like a regression in aligning my investments with my values.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 8 |
| Year 2 | 5 | 8 |
| Year 3 | 5 | 8 |
| Year 5 | 4 | 7 |
| Year 10 | 3 | 7 |
| Year 20 | 2 | 7 |
Air Force Reservist (Texas)
Age: 56 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 0.0 years
Commonness: 12/20
Statement of Opinion:
- I stick to traditional funds and don't focus on ESG, so this doesn't impact me.
- I'm fine with my current investment strategy and returns.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 7 | 7 |
| Year 10 | 7 | 7 |
| Year 20 | 7 | 7 |
Federal Researcher (California)
Age: 42 | Gender: other
Wellbeing Before Policy: 7
Duration of Impact: 15.0 years
Commonness: 4/20
Statement of Opinion:
- My TSP investments reflect my commitment to social responsibility.
- It's frustrating to lose this option, as I believe ESG factors are crucial for the future.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 7 |
| Year 2 | 6 | 7 |
| Year 3 | 5 | 7 |
| Year 5 | 4 | 6 |
| Year 10 | 4 | 6 |
| Year 20 | 3 | 6 |
Navy Officer (Florida)
Age: 28 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 5.0 years
Commonness: 14/20
Statement of Opinion:
- I'm still learning about investments and haven't considered ESG much.
- This policy doesn't worry me as I focus on standard funds.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 6 | 6 |
| Year 5 | 5 | 6 |
| Year 10 | 5 | 6 |
| Year 20 | 5 | 6 |
Civil Engineer (Virginia)
Age: 49 | Gender: female
Wellbeing Before Policy: 8
Duration of Impact: 10.0 years
Commonness: 8/20
Statement of Opinion:
- The ESG options were a significant reason I diversified within my TSP.
- Now I'll need to reassess my strategy, which is disheartening.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 8 |
| Year 2 | 6 | 8 |
| Year 3 | 6 | 8 |
| Year 5 | 5 | 7 |
| Year 10 | 5 | 7 |
| Year 20 | 4 | 7 |
Retired Postal Worker (Illinois)
Age: 62 | Gender: female
Wellbeing Before Policy: 9
Duration of Impact: 0.0 years
Commonness: 10/20
Statement of Opinion:
- My priority is secure, traditional investments as I approach retirement.
- I'm unaffected by changes in ESG investment policies.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 9 | 9 |
| Year 2 | 9 | 9 |
| Year 3 | 9 | 9 |
| Year 5 | 9 | 9 |
| Year 10 | 9 | 9 |
| Year 20 | 8 | 8 |
Federal IT Specialist (New York)
Age: 37 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 8.0 years
Commonness: 7/20
Statement of Opinion:
- While I am disappointed by the restriction, I'll rebalance to maintain growth potential.
- ESG was part of my diversified strategy and it feels like a loss.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 7 |
| Year 2 | 6 | 7 |
| Year 3 | 6 | 7 |
| Year 5 | 6 | 7 |
| Year 10 | 5 | 6 |
| Year 20 | 5 | 6 |
Nurse (Army Reserve) (Colorado)
Age: 31 | Gender: female
Wellbeing Before Policy: 8
Duration of Impact: 15.0 years
Commonness: 5/20
Statement of Opinion:
- Flexibility in investment options is important to me.
- Losing ESG options in my TSP feels limiting.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 8 |
| Year 2 | 6 | 8 |
| Year 3 | 6 | 8 |
| Year 5 | 5 | 7 |
| Year 10 | 5 | 7 |
| Year 20 | 4 | 7 |
Department of Agriculture Employee (Michigan)
Age: 45 | Gender: male
Wellbeing Before Policy: 8
Duration of Impact: 0.0 years
Commonness: 15/20
Statement of Opinion:
- I've always prioritized stable returns over trendy funds.
- This policy doesn't change much for my strategy.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 8 | 8 |
| Year 3 | 8 | 8 |
| Year 5 | 8 | 8 |
| Year 10 | 8 | 8 |
| Year 20 | 7 | 7 |
Park Ranger (Oregon)
Age: 39 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 20.0 years
Commonness: 6/20
Statement of Opinion:
- The ESG funds align with my personal and professional values.
- Removing this option reduces alignment between my values and investments.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 7 |
| Year 2 | 5 | 7 |
| Year 3 | 5 | 7 |
| Year 5 | 4 | 6 |
| Year 10 | 4 | 6 |
| Year 20 | 3 | 6 |
Cost Estimates
Year 1: $5000000 (Low: $3000000, High: $7000000)
Year 2: $5000000 (Low: $3000000, High: $7000000)
Year 3: $5000000 (Low: $3000000, High: $7000000)
Year 5: $5000000 (Low: $3000000, High: $7000000)
Year 10: $5000000 (Low: $3000000, High: $7000000)
Year 100: $5000000 (Low: $3000000, High: $7000000)
Key Considerations
- The primary concern for TSP account holders will be the potential for competitive returns in non-ESG funds, impacting retirement savings.
- The need for clarity on what constitutes ESG criteria to ensure compliance and avoid legal challenges.
- Monitoring potential changes in fund performance due to altered investment strategies.