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Majority of FTSE 100 firms include ESG goals in remuneration decisions

Published November 26, 2021

Majority of FTSE 100 firms include ESG goals in remuneration decisions

Almost 60% of FTSE 100 companies now include environment, social and governance (ESG) measures as part of their executive incentive plans, according to analysis by PwC.

With the 2021 AGM season now over, PwC analysed the executive remunerations decisions for FTSE 100 companies. The research found 58% of the FTSE 100 linked ESG measures to executive pay in 2021.

The professional services company’s research shows the inclusion of ESG measures as part of variable incentive arrangements is part of ongoing trend. This year there was an increase of nearly one third on last year, when 45% of companies had these measures.

In 2020, 46% of FTSE companies had an ESG measure in their annual bonus, while 32% incorporated an ESG measure into the assessment of their 2021 long-term incentive plans (LTIP). The average weighting of ESG measures is 16% in the bonus and 20% in the LTIP.

Phillippa O’Connor, Reward & Employment Leader at PwC UK, commented: “Our research shows that 28% of FTSE 100 companies have a measure linked to decarbonisation and net zero. Executive pay and reward offer an important lever to align senior leaders with ESG challenges and is increasingly seen as a key tool to achieving change, with two thirds of investors believing that ESG performance measures and targets should be included in executive pay.”

The FTSE 100 executive pay report is based on the 97 published Directors’ Remuneration Reports of FTSE 100 companies voted on in the 2021 AGM season. Data includes standalone ESG measures and underpins.