TSP Pressed on ‘Left-Leaning’ Fund Managers’ ESG Focus

A pair of Republican senators have pushed back on “troubling statements by the companies that manage federal employees’ retirement investments suggesting those asset managers are not putting federal employees’ retirement security first.”

In a June 30 letter to David Jones, Acting Chairman of the Federal Retirement Thrift Investment Board, U.S. Senators Pat Toomey (R-PA), ranking member on the Senate Committee on Banking, Housing and Urban Affairs, and Ron Johnson (R-WI), Ranking member, Permanent Subcommittee on Investigations Senate Committee on Homeland Security and Governmental Affairs, expressed concerns about “recent statements by the CEOs of BlackRock and State Street Global Advisors (SSGA).” Specifically, the letter states that those individuals have indicated “they are using their control of proxy votes for federal employees’ Thrift Savings Plan (the Plan) investments to pressure other companies to adhere to their own environmental and social policy views.”

The letter notes that “while these proxy voting guidelines are ostensibly focused on the investor’s fiduciary advantage, both entities are increasingly incorporating left-leaning environmental, social, and corporate governance (ESG) priorities into these guidelines.” 

It goes on to note that, “in light of these concerns, we ask that you provide a briefing detailing BlackRock’s and SSGA’s policies for using proxy voting rights derived from Plan assets, Board oversight of proxy voting use by Plan investment managers, and Board recourse if an investment manager is found to have violated their fiduciary duty no later than the week of July 26, 2021.”

Additionally, the letter requests:

• Any analysis or determinations by FRTIB or its agents that the federal law barring the federal government from exercising voting rights associated with funds in the plan does not apply to the plan’s investment managers.
• The most recent contracts between FRTIB and BlackRock and SSGA regarding the management of plan assets, including any provision related to proxy voting authorities.
• Any documents or communications between FRTIB and its employees or agents and BlackRock or SSGA discussing proxy voting policies or guidelines.
• Any analysis or determinations by FRTIB or its agents that BlackRock and SSGA’s proxy voting policies or guidelines are consistent with the fiduciary obligations imposed by Federal law on plan assets.
• Any analysis or determinations by FRTIB or its agents that proxy voting by investment managers is in the fiduciary interests of plan participants.
• For any proxy vote within the last five years on a shareholder proposal in which BlackRock or SSGA did not vote in accordance with a company’s management, copies of any analysis documenting the anticipated increase in financial return in the investment as a result of such a vote.

The request comes in the wake of a recent recommendation by the Government Accountability Office (GAO) that the Federal Retirement Thrift Investment Board (FRTIB) evaluate the investment offerings in the Thrift Savings Plan (TSP), emphasizing that the plan should assess its exposure by analyzing the potential financial performance of its portfolio holdings under projected climate change scenarios.