More Companies Are Tying ESG Metrics To Executive Compensation: WTW
HRDIVE, Friday, May 10th, 2024
Despite political blowback in the U.S., companies are increasingly incorporating ESG metrics into performance measures and incentive plans, according to the insurance services provider.
Nearly two thirds (58%) of companies from the S&P Composite 1500 Index - which covers approximately 90% of the market capitalization of U.S. stocks - are incorporating ESG into their CEO performance metrics, up from 23% in 2019, global insurance broker and advisory firm WTW told reporters Tuesday.
Alex Ha, WTW's director of executive compensation and board advisory, said the use of ESG underwent a more 'dramatic increase' despite the use of other non-financial strategic measures going down. If companies incorporated ESG into their annual incentive plans, they typically did it in place of other non-financial measures, which have historically accounted for no more than 20% of such strategies, he said.
Some 7% of S&P 500 companies introduced or added another ESG metric into their incentive plans, while 5% of S&P 500 companies modified the use of such metrics, according to WTW's research. Modifications included changes in metric weightage, revising environmental, social and governance goals or removing these targets altogether from incentive plans.