Federal Workers Are Forced to Invest in Fossil Fuels. A New Bill Would End That.

A growing number of progressive candidates are running in U.S. elections — and winning — on platforms that address the climate crisis and support a Green New Deal. The appeal of campaigning on those issues reflects how the majority of voters in the United States are concerned about air, water and soil pollution in their communities.

But lawmakers and staffers with high hopes for passing rigorous climate legislation are finding themselves tied to public pensions that include assets in companies like ExxonMobil, because the federal government doesn’t offer fossil-fuel-free retirement options to its employees. Passing climate legislation that weans the economy off of fossil fuels and holds the industry accountable for its outsized contributions to the climate crisis will likely erode the industry’s profitability. And while that’s exactly what many progressives are aiming to do, under the existing system, those same efforts could compromise retirement savings for 5.5 million federal workers.

“Forcing federal employees to invest their savings in the fossil fuel industry threatens both the future of our planet and the bottom line for these workers saving for retirement,” Kelly Martin, director of the Sierra Club’s Beyond Dirty Fuels campaign, said in a statement.

In November, Rep. Emanuel Cleaver (D-Missouri) and Rep. Rashida Tlaib (D-Michigan) introduced legislation that could change that. Known as the Restructuring Environmentally Sound Pensions in Order to Negate Disaster Act of 2020 (RESPOND Act), the bill would, for the first time, require the Securities and Exchange Commission and the Federal Reserve to issue an annual report analyzing how climate change poses a risk to $565 billion in federal employee retirement funds, as sea-level rise threatens coastal pipelines, for instance, and fossil fuel companies are held liable for related accidents in court. The bill goes hand-in-hand with another proposed measure — the RISE Act, originally introduced by Sen. Jeff Merkley (D-Oregon) in 2018 — that would allow federal employees to choose a fossil-fuel-free pension plan.

Pension divestment is already underway in many places. In 2015, Norway announced it would partially divest its pension funds from coal, which head of Greenpeace Norway, Truls Gulowsen, referred to as “the biggest divestment from coal in history,” according to The Guardian. And evidence that divestment is a financially responsible move is mounting. A 2019 report by Corporate Knights shows state workers in California and Colorado lost a combined $19 billion in retirement funds over 10 years by remaining invested in fossil fuel assets. For California public school teachers, losses amounted to over $5,000 per person. And New York State pensions lost $850 million in fossil fuel stocks in 2020 alone, according to 350.org.

When asked how worried federal employees should be about the risk fossil fuel investments pose to their pensions, Representative Cleaver told Truthout that no rigorous studies have been conducted on climate-related risks to the federal pension system — which is exactly what the RESPOND Act aims to set in motion. “Given that New York’s fund is less than half the size of the federal one, it is reasonable to expect losses to be even more significant for retirement funds at the federal level,” Cleaver said.

The current pension fund for federal employees, offered through what’s called the Thrift Savings Plan (TSP), doesn’t disclose all of its investments. But it does share the top 10 largest holdings, which in its “I-Fund” include British Petroleum PLC (BP) and Total SA, a French-owned oil and gas company. According to TSP data, I-Fund rates of return were negative in 2018, and for five months of 2020. Its “C-Fund” includes holdings in JPMorgan Chase, the top funder of coal, oil and gas operations. In 2019, E&E News reported that Exxon Mobil Corp. was included in that fund’s most valuable stocks. Exxon is no longer listed, which could be because the company’s stocks have plummeted more than 50 percent since 2018.

In response to the introduction of the Senate version of the bill, in 2018, public policy director of the American Federation of Government Employees (AFGE), Jacqueline Simon, told E&E News she didn’t think union members should be troubled by having fossil fuel investments. “Somebody can have a very ethical life and work at EPA and enforce clean air and clean water standards or be a climate scientist or anything like that and have some of their retirement money invested in Exxon and not feel morally compromised,” she said. AFGE, which represents 700,000 federal and Washington, D.C., government workers, declined to comment on the newly proposed legislation.

Federal workers who spoke to E&E anonymously said there is a growing concern among staffers about the climate crisis’s impact on personal finances and future plans. “If I lose 10 percent of my retirement account, guess what? I’m working for another five years,” one Senate aide said. “That’s not just pennies. That’s a big deal.”

Steven Feit is an attorney for the Climate & Energy Program at the Center for International Environmental Law, which has endorsed the RESPOND and RISE Acts. He told Truthout the proposed legislation is the latest in what he calls the “sprawling and diverse” divestment movement.

“This is being driven in large part by the fact that we’re seeing the energy sector do extremely poorly in comparison with the rest of the market,” he said. He added that passing the bill would be a milestone, not only because it would lead to protections for longtime federal workers, but also because it could spur a cascade of other large-scale pension divestment efforts, akin to the university divestment movement that began on college campuses in 2010. By 2019, 1,110 institutions had divested $11 trillion from fossil fuel companies, according to a report by 350.org, which referred to the wave of divestment as the “fastest growing social movement in history.”

Activists have since expanded pressure elsewhere. “The movement has set its sights on other parts of the finance industry including insurance, asset management, banks and even central banks,” the head of 350’s Global Finance Campaigns department, Brett Fleishman, told Truthout. Public pensions — city, state and federal — are a logical next step, especially given that some of the original college divestment organizers are now serving in public office, like newly elected Maine State Sen. Chloe Maxmin, Fleishman pointed out. He said passing the RESPOND Act would signal to the world that the U.S. is serious about returning to the Paris Agreement and addressing the climate crisis.

The climate justice activist group Zero Hour has been the only youth-led group to immediately endorse the proposed legislation. Zanagee Artis, Zero Hour co-founder and policy director, told Truthout that the group decided to support the bill on behalf of the millions of federal workers who make the government tick, like secretaries and staffers, who may unwillingly or unknowingly be investing their retirement money in “a system that is bound to fail.”

“There are so many issues we have to address related to climate change,” Artis said, noting that planning for retirement hadn’t much crossed his mind until considering the proposal. “This goes for many different areas of our daily lives that no one is thinking about.”