Agenda – Climate Disclosure May Encourage Executive Pay Tied to ESG

April 29, 2022

The recent Securities and Exchange Commission proposal requiring companies to make climate disclosure in official filings may impact boards’ decision-making regarding tying executive pay to environmental, social and governance metrics, according to some compensation experts.

Many companies in the U.S. and Europe are already linking greenhouse gas emissions reductions to their executive compensation packages, and regulation may spur that development along, according to market watchers such as Brian Bueno, the ESG leader at executive compensation and corporate governance consultancy Farient Advisors.

“In terms of compensation, it continues to propel the ball forward, putting pressure on companies to actually make progress towards addressing their climate risks,” said Bueno.
“If companies are being forced to disclose climate data, then they’re going to get additional pressure from investors to reduce their greenhouse gas emissions. Then it creates a kind of link to put those in the executive incentive plans.”

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