By Alana Pipe

In January, Apple disclosed in its proxy that it would begin tying bonus pay to environmental, social and governance targets starting in 2021. The compensation committee will apply a modifier related to the company’s performance on ESG goals to adjust annual incentive pay, up or down, by up to 10%, the proxy states.

Companies and boards are increasingly interested in sustainability issues, since they are closely linked to their future financial success, says Eric Hoffmann, Farient Advisors’ vice president of information services and technology solutions. Moreover, states are beginning to pass laws restricting greenhouse gas emissions that will take hold in the not-too-distant future. “Companies are having to react to that,” he says.

However, the use of sustainability-related incentive metrics is still relatively rare. Just nine companies in the S&P 100 disclosed that they used these types of targets in 2019 executive pay plans, according to data from Farient, and use is most prevalent among utilities and energy companies. Indeed, three of four utilities companies in the S&P 100, Duke Energy, NextEra Energy and Southern Company, tied executive pay to the environment, according to 2020 proxy statements.

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