“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, 2023, and April 15, 2024.
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 2024 (just 11% in LTI awards).
Types—Social metrics (most commonly, diversity and inclusion) led environmental, governance, and “other” ESG metrics by a wide margin, at 68%, 39%, 30%, and 26% 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 at least half of companies in each sector used ESG metrics, Energy and Utility sector companies led the way at 95% and 93%, respectively, with Communication Services in the rear at 50%. Looking at specific metric categories, Utilities led the way on social metrics; Energy on environmental metrics; and Real Estate on governance metrics.
The report also benchmarks approaches to incorporating ESG metrics, e.g., scorecard, individual performance assessment, standalone.
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This post first appeared in the weekly Society Alert!