Semler Brossy's "ESG + Incentives report" benchmarks the prevalence and types of ESG metrics being used by the S&P 500 in their executive compensation programs based on proxy statements filed from May 2023 to April 2024.
According to the report, 74% of the S&P 500 included an ESG metric in their annual or long-term incentive plan; of those, 71% included human capital management (HCM) metrics in their incentive plans compared to 42% that included environmental metrics and 42% that included other metrics (e.g., community engagement, customer satisfaction, cyber security, product quality). A majority of companies included metrics across multiple categories.
As shown here, Diversity & Inclusion was the most prevalent metric used by a wide margin; however, its use declined year-over-year, while the use of other metrics increased:
The metrics that increased in prevalence most year-over-year were those relating to carbon footprint, sustainable sourcing, talent development, and employee satisfaction.
ESG metrics are most commonly incorporated into annual incentive plans as part of a weighted structure.
Access additional resources on our Executive Pay page »Non-Financial Metrics (Sustainability, DE&I, etc.).
This post first appeared in the weekly Society Alert!