“ESG Incentive Practices at S&P 500 Companies” from Meridian Compensation Partners benchmarks the use of ESG-related metrics in short- and long-term incentives granted to CEOs at S&P 500 companies based on proxy statements filed between April 16, 2022, and April 15, 2023.
Among the key takeaways:
Prevalence overall—73% of S&P 500 companies included at least one ESG metric in short-term incentive (STI) and/or long-term incentive (LTI) plans in 2023 (71% STI and 9% LTI, respectively).
Types—Social metrics (most commonly, diversity & inclusion) led environmental, governance, and “general ESG” metrics by a wide margin, at 66%, 32%, 22%, and 24%, respectively. Carbon footprint and emission reductions and succession planning were the most prevalent environmental and governance metrics, respectively.
Top 10 Metrics (prevalence)
Industry variations—By industry, while more than half of companies in each sector used ESG metrics, Utilities and Energy sector companies led the way at 97% and 91%, respectively, with Consumer Discretionary in the rear at 60%. Looking at specific metric categories, Communication Services led the way on social metrics; Energy on environmental metrics; and Financials on governance metrics.
The report also benchmarks approaches to incorporating ESG metrics, e.g., scorecard, individual performance assessment, standalone.