2024 ESG + Incentives Report
INTRODUCTION Environmental, Social, and Governance (ESG) considerations have been a priority for many corporations over the last half-decade or more. More and more companies have added ESG metrics to their incentive plans in recent years to signal focus and accountability amidst the increased interest in these topics. ESG metric prevalence for executive incentive plans across […]
John Borneman is a Managing Director, Mat Mazzoni is a Consultant, and Mira Yoo is a Senior Associate at Semler Brossy Consulting Group LLC. This post is based on a Semler Brossy memorandum by Mr. Borneman, Mr. Mazzoni, Ms. Yoo, Jay Veale, Cecilia Miao, and Anjani Trivedi.
INTRODUCTION
Environmental, Social, and Governance (ESG) considerations have been a priority for many corporations over the last half-decade or more. More and more companies have added ESG metrics to their incentive plans in recent years to signal focus and accountability amidst the increased interest in these topics. ESG metric prevalence for executive incentive plans across the S&P 500 rapidly increased from 57% in FY2020 to 70% in FY2021. However, the adoption of ESG metrics in incentives has since plateaued, with prevalence changing from 72% in FY2022 to 74% in FY2023.
Companies appear to be shifting their focus from adoption to refinement of ESG metrics, with prevalence in annual incentive plans (AIPs) and long-term incentive plans (LTIPs) remaining relatively consistent since FY2021 as companies continue to prioritize the use of short-term ESG goals. However, companies continue to adjust existing plans away from discretionary incentives and towards weighted metrics. In FY2023, 87% of companies with ESG metrics in incentives reported using weighted metrics, up from 72% in FY2021. (more…)
