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: Sen. Lee, Mike [R-UT]
Target Audience
Population: Participants of the Thrift Savings Plan
Estimated Size: 8000000
- The Thrift Savings Plan is a retirement savings and investment plan specifically for federal employees and members of the uniformed services in the United States.
- There are approximately 8 million participants in the Thrift Savings Plan as per recent data.
- The impact is limited to participants of the TSP because the legislation specifically targets the investment options within this plan.
- The restriction on ESG investments may affect the retirement savings growth potential for these participants, depending on the performance of ESG vs non-ESG investments.
Reasoning
- The Thrift Savings Plan (TSP) is a retirement savings and investment plan specific to federal employees and the uniformed services, affecting approximately 8 million participants. This policy prohibiting ESG investments directly targets investment options within TSP, impacting only this constituency.
- While ESG-focused investments may align with some participants' values and offer diverse growth opportunities, others may prioritize traditional performance metrics over ESG criteria. The policy could potentially limit the investment choice diversity that some participants value.
- Budget limitations imply that significant outreach or dramatic changes in investment profitability due to this policy would be restricted in scope, possibly affecting only a subset of participants who are both financially educated and highly value ESG factors.
- Considering common retirement savings concerns, this policy could result in minimal immediate wellbeing impact for many, but those heavily invested in ESG factors may feel a larger potential long-term impact, whether economic or value-based.
Simulated Interviews
Federal employee (Washington D.C.)
Age: 50 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 20.0 years
Commonness: 3/20
Statement of Opinion:
- I'm concerned about the lack of flexibility now in my TSP to choose investments that align with my values.
- The ESG-focused funds were performing well and aligned with my personal commitment to sustainability.
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 | 5 | 8 |
| Year 10 | 4 | 8 |
| Year 20 | 3 | 9 |
Military personnel (California)
Age: 35 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 5.0 years
Commonness: 6/20
Statement of Opinion:
- I focus on returns rather than the type of investments within TSP. This policy doesn’t change much for me.
- I believe it's best to stay financially pragmatic and flexible.
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 | 6 | 6 |
| Year 10 | 7 | 7 |
| Year 20 | 7 | 7 |
Federal employee (Texas)
Age: 60 | Gender: male
Wellbeing Before Policy: 8
Duration of Impact: 0.0 years
Commonness: 5/20
Statement of Opinion:
- For me, security and stable returns are more important than ESG principles.
- I don't follow ESG trends closely, so this policy isn’t a major issue for my TSP. It’s the returns that matter.
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 |
Federal employee (New York)
Age: 45 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 10.0 years
Commonness: 4/20
Statement of Opinion:
- I like to have the option to invest in sustainable companies. This feels like a step backwards.
- I'll have to reevaluate some of my portfolio allocations.
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 | 7 | 8 |
| Year 10 | 7 | 8 |
| Year 20 | 8 | 9 |
Federal worker (Virginia)
Age: 55 | Gender: other
Wellbeing Before Policy: 7
Duration of Impact: 0.0 years
Commonness: 7/20
Statement of Opinion:
- I'm not very aware of what ESG even means for my investments, I just follow the default options.
- This policy seems complicated but probably won’t impact me directly.
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 |
Military retiree (Florida)
Age: 40 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 15.0 years
Commonness: 4/20
Statement of Opinion:
- I prefer to include ESG options as part of a balanced retirement strategy.
- This seems restrictive, but I'll manage with conventional options if necessary.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 6 |
| Year 2 | 5 | 6 |
| Year 3 | 6 | 7 |
| Year 5 | 6 | 7 |
| Year 10 | 6 | 8 |
| Year 20 | 7 | 8 |
Federal contractor (Illinois)
Age: 30 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 3.0 years
Commonness: 6/20
Statement of Opinion:
- I was just starting to explore ESG investments as part of a balanced portfolio.
- While I think ESG insights are valuable, my main focus is growing my savings effectively.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 5 |
| Year 2 | 5 | 6 |
| Year 3 | 6 | 6 |
| Year 5 | 6 | 7 |
| Year 10 | 7 | 8 |
| Year 20 | 8 | 9 |
Retired military officer (North Carolina)
Age: 65 | Gender: male
Wellbeing Before Policy: 8
Duration of Impact: 0.0 years
Commonness: 5/20
Statement of Opinion:
- I prefer clear, stable options rather than constantly evaluating ESG metrics.
- The focus for me is predictability and consistent returns.
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 | 8 | 8 |
Federal intern (Georgia)
Age: 29 | Gender: other
Wellbeing Before Policy: 5
Duration of Impact: 20.0 years
Commonness: 2/20
Statement of Opinion:
- The loss of ESG options limits my strategy for ethical investment growth.
- I'm young and want to diversify to reflect economic changes, even ESG.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 4 | 5 |
| Year 2 | 4 | 6 |
| Year 3 | 5 | 7 |
| Year 5 | 5 | 7 |
| Year 10 | 6 | 8 |
| Year 20 | 7 | 9 |
Civil service worker (Ohio)
Age: 48 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 1.0 years
Commonness: 6/20
Statement of Opinion:
- I don't fully understand what this ESG focus means for my TSP so I'm mostly neutral.
- My main concern is avoiding losses rather than gaining extra options.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 6 | 7 |
| Year 5 | 6 | 7 |
| Year 10 | 6 | 7 |
| Year 20 | 6 | 7 |
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
- Impact on TSP investments' return performance and associated participant satisfaction.
- Administrative costs related to enforcing the prohibition of ESG investments within TSP funds.
- Potential legal disputes from affected parties who might oppose the restrictions.