1、2022 Global Report on ESG Metrics in Executive Incentive Plans2/2022 Global Report on ESG Metrics in Executive Incentive PlansExecutive summary 03Introduction 04ESG metric classification 05Data sample 06Global ESG highlights 07Prevalence of ESG metrics in executive incentive plans 08Most prevalent m

2、etrics used in the six ESG categories 10TABLE OF CONTENTSHow ESG is measured in incentive plans 12How ESG metrics are incorporated into all incentive plans 14How ESG metrics are incorporated into STI plans 15How ESG metrics are incorporated into LTI plans 16Contact us 17 2022 Global Report on ESG Me

3、trics in Executive Incentive Plans/3Continued increase in the global adoption of environmental,social and governance(ESG)metrics in executive incentive plans.Seventy-seven percent of listed companies include ESG metrics in either their annual or long-term incentive plans an increase from 68%in the p

4、rior year.ESG metrics are now one of the most prevalent metrics in executive incentive plans.Europe continues to lead the way in the use of ESG incentive metrics.Ninety percent of European companies,including those in the U.K.,now include at least one ESG metric in their executive incentive plans an

5、 increase from 79%in the prior year.The highest adopters are Germany(98%)and France(100%).ESG metrics are becoming more prominent in long-term incentive plans,especially in Europe.Prevalence of ESG metrics has increased from 28%to 44%year over year among many organizations in Europe.This development

6、 aligns well with the long-term time horizon of measuring ESG performance,such as reducing carbon emission.In the U.S.,the use of ESG metrics in long-term incentive plans remains uncommon,having increased from 5%to 8%year over year.Climate and other environmental metrics were a primary focus in the

7、past year.Prevalence of environmental metrics almost doubled worldwide year over year,increasing from 22%to 40%.While there remains significant regional disparities in the use of climate and environmental metrics,we expect adoption to increase across regions amid pressure from institutional investor

8、s and the regulatory environment.Companies continue to rely on a mix of empirical ESG goals and qualitative assessments.ESG metrics measured with empirical goals are most common in Europe,particularly in long-term incentive plans.Globally,48%of companies with ESG metrics measure at least one of them

9、 quantitatively.Practices vary significantly by region,ranging from 34%in the U.S.to 63%in Europe.When measured as weighted metrics or as a distinctive ESG bundle or scorecard,ESG performance typically makes up 20%of total incentive opportunity.Executive summary4/2022 Global Report on ESG Metrics in

10、 Executive Incentive PlansIntroduction*Environment and Sustainability,People and HR,Diversity,Equity and Inclusion,Employee Health and Safety,Customer Service,and GovernanceESG market practice reportData sample and highlights Region and industry coverage ESG categories and classification Highlights

11、Trends in ESG metrics(on regional level only)Impact of ESG metrics Level of performance measurement Key performance indicators(KPIs),underpins and modifiers Prevalence by Global Industry Classification Standard(GICS)industry Median weightings by regionPrevalence of ESG metrics in executive incentive

12、 plans High-level prevalence by region and industry Year-over-year changes in prevalence Number and combination of ESG metricsA finer look into the six ESG categories*Prevalence by GICS industry Impact on payout and level of performance measurement Median weightingsThis report covers an analysis of

13、ESG metrics used in executive incentive plans for a sample of the worlds largest public companies based on public disclosures filed in 2022 for each respective market.2022 Global Report on ESG Metrics in Executive Incentive Plans/5Environment and Sustainability Reduce carbon emissions Waste reductio

14、n Green financing Limit global warming Protect natural resources Use of renewable energyDiversity,Equity and Inclusion Gender balance in management Diverse workforce Pay gapEmployee Health and Safety Employee wellbeing Incident/Accident rate FatalitiesPeople and HR Leadership Succession management T

15、raining and development Employee engagementCustomer Service Net promoter score Service quality Customer satisfactionGovernance Ethics/Human rights along the supply chain Participation in sustainability index Compliance Corporate social responsibility(CSR)Stakeholder relationships Risk management Dat

16、a protection and privacy ReputationESG metric classificationHow WTWs internal metric definitions fit the broader ESG frameworkEEnvironmentalSSocialGGovernanceHuman capital metrics are part of the Social category.Issues connected to environmental sustainability,such as responsible use of natural reso

17、urces,climate change,pollution and the likeFactors such as how a company treats its workers and customers,health and safety considerations,and diversity,equity and inclusionA focus on such topics as business ethics,board structure and independence,engagement for society,reputation and risk managemen

18、t6/2022 Global Report on ESG Metrics in Executive Incentive PlansData sampleThis report is based on disclosures from 885 companies in four marketsDistribution among industriesCanada60 companiesTSX 60Europe233 companiesAEX 25BEL 20CAC 40DAX 40IBEX 35ISEQ 20MIB 40SMI 20United Kingdom100 companiesFTSE

19、100United States500 companiesS&P 5000%5%10%15%20%EnergyReal estateCommunication servicesUtilitiesMaterialsConsumer staplesHealthcareInformation technologyConsumer discretionaryIndustrialsFinancials16%15%12%11%11%7%7%7%5%5%4%LQ$14,472Median$26,483UQ$53,900LQ$4,247Median$10,208UQ$23,559LQ8,775Median20

20、,000UQ58,184MARKET CAPREVENUESEMPLOYEES Several companies are listed in more than one index;therefore,the overall number of companies does not equal the sum of all indices.Market capitalization as per December 31,2021;displayed in USD millions.Revenues are displayed in USD millions.Companies from th

21、e financial sector are excluded from the revenue statistics.Sector breakdown is based on the 11 GICS sectors.This report covers the largest companies in the U.S.,Canada,U.K.and Europe.A separate report with our findings for the Asia Pacific region will be published in early 2023.Data are based on cu

22、rrent index constituents.Where this research report references year-over-year comparisons of ESG metrics,results may be affected moderately by changes in index composition.2022 Global Report on ESG Metrics in Executive Incentive Plans/7OVERALL PREVALENCE OF ESG METRICS IN CANADA,EUROPE,THE UNITED KI

23、NGDOM AND THE UNITED STATESPREVALENCE BY ESG CATEGORYPREVALENCE BY ESG METRIC CATEGORIESGlobal ESG highlightsAll plansShort-term incentive(STI)Long-term incentive(LTI)Companies that use at least one ESG metric in their incentive plans(STI or LTI or both)Environmental metric+18 ppEnvironment and Sust

24、ainabilityPeople and HRDiversity,Equity and InclusionEmployee Health and SafetyCustomer ServiceGovernance+7 pp+23 ppYear over year(2021 2022)+3 pp+1 pp+10 ppSocial metricGovernance metricCompanies that use at least one ESG metric in their STI plansCompanies that use at least one ESG metric in their

25、LTI plansPrevalence reflects any kind of ESG metrics incorporated in incentive plans,from stand-alone KPIs to parts of bundles or modifiers.Percentage of companies that use at least one:68%of companies have at least one human capital metric in their incentive plans.40%45%72%EGS77%202275%202221%20226

26、8%202166%202113%2021Human capital metrics22%44%22%25%29%35%40%51%45%28%30%45%8/2022 Global Report on ESG Metrics in Executive Incentive PlansPrevalence of ESG metrics in executive incentive plansOverall use of ESG metrics within executive incentive plans rose to 77%,up by nine percentage points over

27、 the prior year(68%).ESG metrics are incorporated into incentive systems in multiple ways,including weighted KPIs,bundles,underpins or modifiers.STI plan usage is up by nine percentage points from 66%in the prior year.The growth is driven by increases across all markets.When comparing trends across

28、markets,prevalence of ESG metrics in Europe and the U.K.is much higher than in North America.LTI plan usage is up by eight percentage points from 13%in the prior year,driven by sharp increases in Europe and the U.K.ESG metrics are now used by 46%of European companies and 37%of U.K.companies in LTI p

29、lans.In North America,prevalence of ESG LTI metrics remains below 10%following moderate increases from the prior year.Overall prevalence of ESG metrics in Canada,Europe,the United Kingdom and the United StatesAll plans77%75%21%of companies incorporate ESG metrics in their incentive plansof companies

30、 incorporate ESG metrics in their STI plansof companies incorporate ESG metrics in their LTI plansCanada(n=60)Canada(n=60)Canada(n=60)Europe(n=233)Europe(n=233)Europe(n=233)United Kingdom(n=100)United Kingdom(n=100)United Kingdom(n=100)United States(n=500)United States(n=500)United States(n=500)+3 p

31、p+2 pp+3 pp+12 pp+11 pp+17 pp+9 pp+9 pp+3 pp+8 pp+6 pp+13 pp77%75%21%7%46%8%37%STI plansLTI plans69%80%91%89%78%85%85%67%2022 Global Report on ESG Metrics in Executive Incentive Plans/9%of companies using human capital metrics Social metrics are most frequently used in incentive plans among the thre

32、e ESG categories in all four markets.Customer Service metrics are included under Social but excluded from the statistics related to human capital metrics.Prevalence of Environmental metrics is highly disparate across the four markets,ranging from 25%of companies in the U.S.to almost two-thirds of co

33、mpanies in Europe and the U.K.Which ESG metrics are incorporated into executive incentive plans75%63%70%75%United StatesCanadaEuropeUnited KingdomAll percentages are expressed as%of all companies in the sample.CanadaEuropeUnited KingdomUnited StatesG38%64%42%52%CanadaEuropeUnited KingdomUnited State

34、sE38%66%62%25%66%78%78%80%CanadaEuropeUnited KingdomUnited StatesS68%of companies include human capital measurements in their incentive plans10/2022 Global Report on ESG Metrics in Executive Incentive PlansMost prevalent metrics used in the six ESG categoriesAll plans Canada,Europe,the United Kingdo

35、m and the United States A broad range of metrics is being used within the Environmental,Social and Governance categories.This chart shows the prevalence of companies that use at least one of the reflected metrics.Metrics related to succession/talent management are the most common ESG metrics on a gl

36、obal level,used in 24%of companies.Environmental metrics related to carbon/GHG emissions(23%of companies)and Social metrics related to employee engagement(22%of companies)are also widespread.Within the Diversity,Equity and Inclusion category,which has most substantially increased in the past year,th

37、e most frequent metrics are related to Diversity,Equity and Inclusion within management,(e.g.,the proportion of women in leadership positions),used in 17%of companies,and a diverse workforce(16%of companies).Within the Health and Safety category,the measurement of incidents and injuries is by far th

38、e most frequently used.Carbon emission reductionEnergy transitionEnvironmental planningEnvironmental23%10%10%Stakeholder relationshipComplianceRisk managementGovernance11%13%13%Customer satisfactionCustom experienceNet promoter scoreSocial Customer Service11%8%8%Succession/Talent managementEmployee

39、engagementCultureSocial People and HR24%22%15%Management representationWorkforce representationWorkforce inclusion and diversity trainingSocial Diversity,Equity and Inclusion17%16%3%Incidents and injuriesEmployee wellbeingFatalitiesSocial Employee Health and Safety15%5%4%2022 Global Report on ESG Me

40、trics in Executive Incentive Plans/11Overall prevalence of ESG metrics in Canada,Europe,the United Kingdom and the United States The use of ESG metrics went up in all industries,ranging between 59%and 93%of companies.The energy and utilities industries continue to see the highest prevalence of ESG m

41、etrics,followed by the materials industry.Despite a 9%increase from the prior year,IT remains the industry with the lowest prevalence of ESG incentive metrics.Prevalence of ESG metrics is substantially higher in STI plans than in LTI plans across all industries.Companies in the utilities industry ar

42、e the most likely to include ESG metrics in both their STI and LTI plans.Communication services(n=47)Consumer discretionary(n=104)Consumer staples(n=64)Energy(n=37)Financials(n=141)Healthcare(n=95)Industrials(n=131)IT(n=98)Materials(n=63)Real estate(n=46)Utilities(n=59)STI onlySTI and LTILTI only=85

43、%53%30%2%+9 pp+14 pp+10 pp+5 pp+8 pp+9 pp+9 pp+11 pp+12 pp+3 pp+6 pp=68%45%16%7%=75%53%17%5%=92%73%19%=82%58%22%2%=75%69%6%=75%56%17%2%=59%50%5%4%=89%65%21%3%=83%63%15%5%=93%47%46%Overall percentage of companies in the respective industry with at least one ESG metricPercentage point increase from 20

44、21n=number of companies;small samples drive larger year-over-year percentage point changes.Year-over-year changes may fluctuate by+/1 percentage point due to rounding.12/2022 Global Report on ESG Metrics in Executive Incentive PlansHow ESG is measured in incentive plans Across all markets,companies

45、are much more likely to measure ESG performance quantitatively in LTI plans than STI plans.More than half of the companies in Canada,Europe and the U.K.measure ESG performance quantitatively in their short-and long-term incentive plans.In the U.S.,qualitative assessment of ESG performance continues

46、to be the norm when determining incentive payout,especially when incorporated in short-term incentive plans.How ESG metrics are measured in incentive plans in Canada,Europe,the United Kingdom and the United StatesQuantitative/EmpiricalMetrics where the outcome is determined using a quantifiable meas

47、urement process using numerical values(e.g.,absolute amounts,percentage growths)Qualitative/Discretionary/UndefinedMetrics where the outcome is determined qualitatively using discretion and a judgment-based process(e.g.,improve x,develop y)or where assessment details are not disclosedAll plansSTILTI

48、of all companies with ESG metrics are measuring at least one of them quantitativelyof all companies with ESG metrics in their STI plans are measuring at least one of them quantitativelyof all companies with ESG metrics in their LTI plans are measuring at least one of them quantitatively48%41%68%Unit

49、ed States(n=345)United States(n=337)United States(n=39)Canada(n=48)Canada(n=47)Canada(n=4)Europe(n=211)Europe(n=199)Europe(n=108)United Kingdom(n=89)United Kingdom(n=85)United Kingdom(n=37)All percentages are expressed as%of companies with at least one ESG metric(in all plans/STI plans/LTI plans).34

50、%54%65%32%53%51%75%Measurement type57%52%49%73%68%2022 Global Report on ESG Metrics in Executive Incentive Plans/13How ESG metrics are incorporated into incentive plansHow ESG metrics are incorporated into incentive plans in Canada,Europe,the United Kingdom and the United StatesA key performance ind

51、icator is a metric that is directly part of the payout formula,i.e.,considered independently when establishing and calculating incentive payout.A modifier permits modifications to the incentive payout and is built into the payout formula upfront(as opposed to board/committee discretion).An underpin

52、stipulates a threshold or basic level of performance required for some,or all,of the payout under other metrics to occur.Based on disclosure,each metric identified as a KPI is further classified into one of these three groups:Disclosed as a separate,stand-alone metric.In plans with additive payout f

53、ormulas,these metrics usually come with their own distinct weighting.Part of a bundle of metrics that solely includes ESG metrics.Weightings for the specific metrics are usually not available,but the weighting of the bundle can be used to determine the overall weighting of ESG metrics within a plan.

54、Part of a broad bundle of metrics that contains ESG as well as non-ESG metrics.A weighting for the ESG portion of the bundle is usually not available.Stand-alone ESG metricPart of an ESG metric bundlePart of a broader metric bundleKPIHighLowImpact on payoutMODIFIERUNDERPIN21%5%of plans with ESG metr

55、ics use one or more ESG metrics as modifiers.of plans with ESG metrics use one or more ESG metrics as underpins.47%21%32%Stand-alone ESG metricPart of an ESG bundlePart of a broad bundleof plans with ESG metrics use at least one ESG metric as a KPI.86%Some incentive plans may include metrics that fa

56、ll under multiple categories.The median overall weighting*of ESG metrics is 20%*The median overall ESG weighting is composed of incentive plans with stand-alone ESG metrics and ESG bundles.Broader bundles include both ESG and non-ESG elements,and therefore the weighting specified to the ESG portion

57、cannot be determined.14/2022 Global Report on ESG Metrics in Executive Incentive PlansUnited KingdomUnited StatesEuropeStand-aloneStand-aloneStand-aloneESG bundleESG bundleESG bundleBroad bundleBroad bundleBroad bundle90%80%89%44%45%47%17%15%31%39%40%22%7%30%13%18%1%3%KPIsKPIsKPIsModifiersModifiersM

58、odifiersCanadaStand-aloneESG bundleBroad bundle91%57%12%31%26%17%KPIsModifiersUnderpinsUnderpinsUnderpinsUnderpinsHow ESG metrics are incorporated into all incentive plans 2022 Global Report on ESG Metrics in Executive Incentive Plans/15CanadaUnited KingdomUnited StatesEuropeStand-aloneStand-aloneSt

59、and-aloneStand-aloneESG bundleESG bundleESG bundleESG bundleBroad bundleBroad bundleBroad bundleBroad bundle90%93%81%89%56%39%44%42%12%14%15%29%32%47%41%29%28%9%31%15%18%14%1%4%KPIsKPIsKPIsKPIsModifiersModifiersModifiersModifiersUnderpinsUnderpinsUnderpinsUnderpinsHow ESG metrics are incorporated in

60、to STI plans16/2022 Global Report on ESG Metrics in Executive Incentive PlansHow ESG metrics are incorporated into LTI plansCanadaUnited KingdomUnited StatesEuropeStand-aloneStand-aloneStand-aloneESG bundleESG bundleESG bundleBroad bundleBroad bundleBroad bundle84%75%90%65%69%60%28%8%36%7%23%4%0%0%2

61、8%10%0%27%0%2%KPIsKPIsKPIsKPIsModifiersModifiersModifiersModifiersUnderpinsUnderpinsUnderpinsUnderpins100%Stand-aloneESG bundle80%20%2022 Global Report on ESG Metrics in Executive Incentive Plans/17 Executive.Pay.Mhttps:/ usAuthors and research contributors Eleanor Blakeslee Matthew Brignull Shai Ga

62、nu Manuel Montecelos Erik Nelson Robert Newbury Kenneth Kuk Judith Schnthal Stefan Werner Jessica YuFor more information,please contact:To see all our related research,please visit:WTW Executive Compensation and Board SolutionsTrusted advisors to compensation,nomination&governance,and sustainability

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