ESG (Environmental, Social and Governance) factors have become critical to good business practice and are tied to the success and long-term sustainability of companies across all sectors. There is an emerging pressure from investors, regulators and other stakeholders to push this further and directly link ESG factors with areas of governance such as executive pay.
We have seen an increasing trend of FTSE listed companies incorporating ESG measures in their incentive plans. Among FTSE 100 companies, 61 percent incorporated ESG measures in their bonus and/or LTI plans, an increase from 32 percent from last year.
If your company is thinking about incorporating ESG measures into your executive incentive plans, below are some initial questions you may want to consider:
- Do you need to include ESG measures in your executive incentive plans?
- ESG for long term or short-term incentives?
- How should you include ESG measures?
- Which ESG measures should be incorporated?
- What is an appropriate weighting for ESG?
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