Climate change is posing an existential threat to more than just the planet. In fact, the federal government is concerned that weather-related risks will begin eroding the retirement portfolios of its employees.

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Earlier this year, the U.S. Government Accountability Office recommended that the board overseeing the Thrift Savings Plan (TSP) for federal workers analyze the financial performance of companies in its portfolio, in light of risks related to climate change and the transition to a low-carbon economy.

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Olivia S. Mitchell, a Wharton professor of business economics and public policy, said the recommendation cracks open the door to green investments, unavailable to governmental employees in the past. The TSP, at $762 billion, is the largest defined contribution plan in the world. From next year, it will allow investors to have access to a mutual fund platform so they can tailor their investments to their own desires by selecting from 5,000 mutual funds.

Under the Employee Retirement Income Security Act of 1974, private pension plan fiduciaries must invest exclusively for the benefit of participants and retirees. “That has been interpreted over the years as meaning you can only take into account risk, return, and financial criteria, not green criteria,” Mitchell said during an interview with the Wharton Business Daily show on SiriusXM. (Listen to the podcast at the top of this page.)

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