For the first time, government workers and military personnel saving for retirement may be able to invest in sustainable, responsible and impact investment funds, based on a vote this week by the Federal Retirement Thrift Investment Board (FRTIB). The board serves the government's massive retirement system known as the Thrift Savings Plan or TSP.

“The potential for expansion of environmental, social and governance investment options to the Thrift Savings Plan beneficiaries is a sign not only of the growing importance of sustainability considerations to investors, but the sophistication behind ESG analysis of mutual funds,” said Linda-Eling Lee, Global Head of ESG Research, MSCI.

Lisa Woll, CEO of US SIF, a forum for SRI investing, praised the board's decision to consider more investment choices for government workers. “Employees have been asking for more diversification,” Woll said in an interview. “There is a petition and letters and we've been getting individual calls. And, workers have called Congress directly.”

Employees in federal agencies such as the Environmental Protection Agency, for example, were particularly interested in having the option to invest in funds that don't hold companies engaged in fossil fuel production, said Woll. She anticipates that if sustainable investment options are added, the availability of SRI information also may prompt employees to independently invest non-retirement monies in SRI.

Once the specific funds to be offered are settled on, a  mutual fund window (MFW) will open allowing employees to make selections from funds approved by the TSP. Funds selected through the MFW will carry their own  expenses, apart from those that have been negotiated for the core investment lineup.

In a May 19, 2014, memorandum, FRTIB executive director Greg Long noted the addition of self-directed investment alternatives to private-sector 401(k) plans through a brokerage window or mutual fund window. But overall, plans are moving away from investment menus with a large line-up of funds in favor of a three-tier menu that serves participant desires, two of which the TSP is currently satisfying. But the “I'll Do It Myself” tier “participants are stymied by the lack of specialized and niche investment options in the TSP.”

But Long expressed concerns about adding another set of choices to the mix. “The MFW still fragments our communication message. Studies have consistently shown a correlation between the increasing number of investment options and participants' decreased ability to diversify their investment within a participant-directed account such as TSP.”

According to research done by FRTIB, greater numbers of employees have been withdrawing their funds from the TSP on retirement. “Probably offering more choices will encourage them to stay,” Woll said.

A petition to the board on, from Federal Employees For Socially Responsible Investment Options In The Thrift Savings Plan, included this comment from a government worker: “When I retire I want to be able to look at my savings and feel as if there are returns in addition to simply the amount I personally have accrued.”