Target Capital | Global Investment Company

Responsible Investing

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Responsible investing

Our goal

At TCA, our vision is to invest for a better future. We want to make a difference for our clients, society and the wider world – while also delivering financial returns. Environmental, social and governance (ESG) considerations have been an integral part of our decision-making process for 5 years. By putting ESG factors at the heart of our investment process, we believe we can generate better outcomes for our clients. The impact of Covid-19 makes this goal even more important. Now, more than ever, we need to work together for a more sustainable future.

Our approach

Responsible investing is about delivering value for clients. Our approach falls into two areas. At the investment stage, we use ESG factors to help decide where best to invest. We integrate ESG into our research, analysis and decision-making processes. We also manage specialized funds that incorporate stronger sustainability or ethical principles. Where we believe we can influence or gain insight we actively engage with the companies and assets in which we invest. We believe this will create long-term value, including in relation to ESG practice. Where we have rights, we also vote at AGMs of target companies to drive change.

Our commitment

It starts with us. As a company, we focus on key societal and environmental issues that matter to our stakeholders, and on which we can have a positive impact. Operationally, that means providing fair and inclusive work and reducing our emissions with a target to reduce the carbon intensity of the assets we invest in by 50% by 2030 vs a 2019 baseline.

Meeting your investment objectives

Protection

Protection – hedging unwanted risks

The importance of hedging interest rate and inflation risks Movements in long term interest rates and inflation can have a big impact on pension scheme funding levels, particularly where the scheme does not have a high level of hedging in place to reduce these risks. Of particular note during the start of 2020 was the influence that COVID-19 had in March, and the impact of the UK’s Mini Budget announcement in September 2022, where we experienced all-time high levels of interest rate volatility.

LDI solutions for all sizes of scheme

We work with schemes of all sizes to deliver LDI solutions to meet their specific requirements. This ranges from segregated mandates through to our flexible pooled LDI fund range. Our pension solutions team works with trustees and their advisers to help them create a solution across the pooled fund range to meet their requirements.

Integrating growth and protection

There are a large number of schemes that are looking to increase their level of interest rate and inflation hedging without sacrificing growth. Our Integrated Liability Plus Solutions (ILPS) funds are a unique, innovative approach to liability management that integrates a cash-efficient return engine with liability hedging within a suite of pooled funds.

Income

Income – meeting your cashflow requirements to pay benefits

Schemes are maturing and becoming cash flow negative As DB pension schemes close to accrual and mature, a growing number of schemes are turning cash flow negative – with the amount paid out to members each year exceeding the amount the scheme receives in annual income from pension contributions and investments. It is important for these schemes to have a plan in place to manage their income requirements.

Implementing a cashflow aware strategy

Depending on the requirements of your scheme, this could range from looking to access sources of contractual income all the way through to a full cashflow driven investment (CDI) strategy. (CDI is where a pension scheme invests in assets that provide contractual income to match as far as possible the expected future cashflow requirements of the pension scheme.)

Schemes of all sizes can now implement a CDI strategy

Historically, a CDI approach was only really available to larger pension schemes. However, innovations in pooled fund solutions mean that schemes of all sizes can now implement this type of strategy, efficiently and at a low cost. Trustees can now choose from a full range of pooled buy-&-maintain credit funds, pooled funds offering access to alternative sources of contractual income (such as private credit) and pooled LDI funds and tailor these to meet the unique cashflow and hedging requirements of their scheme.

Growth

Growth – improving your funding level

Volatility in funding levels continues for many schemes

Over the past few years many pension schemes were experiencing a gradual improvement in their funding level, and a smooth course was being set for the pension scheme to navigate towards its endgame. However, the impact of COVID-19 on pension schemes during 2020 has shown it’s perhaps not going to be as smooth sailing as some were expecting.

Breadth of approaches to meet your requirements

Depending on your specific circumstances there are a wide range of approaches to deliver the growth that is required to improve your funding level. Our investment expertise and capabilities span equities, fixed income, real estate, private markets and Multi Asset Investing solutions.