Case Study: Large Utility Takes Care of Its Own with ESG Metrics

Large Utility Takes Care of Its Own with ESG Metrics

When Farient Advisors began working with this multibillion-dollar utility, it had more than 11 performance metrics in its short-term incentive plan and nine in its long-term incentive plan including environmental, social, and governance (ESG) measures. To say this had a confusing and dilutive impact on executives would be an understatement. Within the first year of engagement, our team streamlined the non-financial performance metrics into indices and focused 15% on “safety” and 10% on operating (including environment).

Our team also helped this client with its ESG evolution by recommending a pay plan for the CEO and executive council that included a 15% weighting in their short-term incentive plan using a diversity and inclusion index. Linking pay to performance resulted in an 18% increase in firmwide diversification. Simplifying the number of metrics clarified goals and helped articulate both the costs and savings of its ESG program.