Linking pay to ESG targets ‘could have unintended consequences’

Around 45% of the FTSE 100 now have ESG targets in their bonuses and LTIPs—but a new study warns there are risks involved.

Image: NPFire/Shutterstock
The inclusion of ESG targets into executive pay may be happening at high speed but it comes with a warning: it may prove "no panacea" and produce “unintended consequences”.
A new study from London Business School and PwC finds that 45% of the FTSE 100 include an ESG target in their annual bonuses or long-term incentive plans (LTIPs), or both, for executives.
The research also revealed that 37% use an ESG target in the annual bonus, with an average weighting of 15%; almost a fifth of the UK’s largest listed companies use ESG in LTIPs, with an average weighting of 16%.
“New” ESG measures are becoming more popular. Companies h
For thoughtful journalism, expert insights on corporate governance and an extensive library of reports, guides and tools to help boards and directors navigate the complexities of their roles, subscribe to Board Agenda