The Government Accountability Office recommended the Federal Retirement Thrift Investment Board, Washington, evaluate the Thrift Savings Plan's investment offerings with an eye on risks related to climate change.
In a report that was published in May and publicly released Thursday, the GAO said retirement plan investments, including the TSP's, could be exposed to financial risks from climate change. The Thrift board "has not taken steps to assess the risks to TSP's investments from climate change as part of its process for evaluating investment options," the GAO stated in its report.
It added, "Taking action to understand the financial risks that climate change poses to the TSP would enhance FRTIB's risk management and help it protect the retirement savings of federal workers."
The Thrift board administers the $757.8 billion Thrift Savings Plan, the retirement system for 6.3 million federal employees and members of the uniformed services. The board is required to invest the TSP's funds passively, and board officials told the GAO they do not focus on risks to a specific industry or company, according to the report.
Ravindra Deo, the Thrift board's executive director, said in a letter to the GAO in April, which is included in the report, that the FRTIB "subscribes to a strict indexing discipline using the broadest possible market opportunity set. As such, individual companies are held in the TSP index funds at their market weights, in line with the theory that markets are generally efficient and that the market portfolio is the most efficient from a risk and return perspective."
Mr. Deo also noted that the board has an investment consultant review the TSP fund offerings periodically to determine whether the offerings are appropriate and if additions are warranted. The last such review was in 2017 and it did not result in any recommended additions, Mr. Deo said. The next review is slated for fiscal year 2022, he added.
In forming its recommendation, the GAO interviewed officials from selected retirement plans for public- and private-sector employees in the U.K., Japan and Sweden that were identified as examples of plans that are addressing climate risks. It also spoke with consulting firms and other stakeholders knowledgeable about climate change and its possible financial impacts, as well as FRTIB officials.