CEOs need to pay attention to climate metrics—or risk getting smaller paychecks - Yahoo Finance
CEOs need to pay attention to climate metrics-or risk getting smaller paychecks
CEOs need to pay attention to climate metrics—or risk getting smaller paychecks
Good morning.
If you want to know how serious companies are about climate, take a look at their executive pay practices. A new report from the Conference Board, out today, says 54% of S&P 500 companies now have climate metrics in their CEO pay plans. That’s up from just 25% in 2021.
Interestingly, the practice was most common with energy companies. The share of Russell 2000 energy companies using climate metrics in CEO pay calculations was 68%, up from 37% in 2021.
Diversity and inclusion metrics have also jumped. They were found in the pay plans of 75% of S&P 500 in 2023, up from 52% in 2021.
The study also found that incorporating ESG metrics into pay packages is much more common among big companies than small ones. In the Russell 3000, only 24% of companies with revenues under $100 million reported using ESG performance metrics, while the share rose to 83% for companies with revenues of $50 billion or more.
The report’s conclusion: The “ESG backlash, which has been mounting since early 2022, has not dissuaded companies from continuing to integrate ESG-related performance metrics into the incentive plans for their CEOs and senior executives.” Indeed, a full 76% of S&P 500 companies now include some measure of ESG performance in their compensation design (up from 66% in 2021.)
The Conference Board produced the study with FW Cook and ESGAUGE, and gave CEO Daily an early look. You can find the full report this morning here. And catch our year-end wrap-up on the Leadership Next podcast
More news below.
Alan Murray
@alansmurray
This story was originally featured on Fortune.com
Related Knowledge Center: Climate economics
Climate change is now a driver of the world’s economy. The impact is profound:
- Catastrophic weather events — hurricanes, floods, droughts, high temperatures — are more frequent and more extreme. The cost can be measured in both the initial damage caused and the longer-term impact on the economy.
- Vulnerable communities are increasing climate-related investments, hardening infrastructure and taking other protective measures.
- Investment in carbon capture and storage technologies is increasingly rapidly.
- Governments are making investments and crafting regulations to reduce emissions of carbon dioxide and other greenhouse gases.
On top of all of this is the cost of uncertainty. As the Fourth National Climate Assessment, released in 2018 by the U.S. Global Change Research Program, says, “The assumption that current and future climate conditions will resemble the recent past is no longer valid.”