APAC companies embracing ESG-linked executive incentives?
APAC companies – According to the companies that disclose information on the use of incentive metrics, European firms continue to lead the pack, with 91% using at least one ESG metric in their incentive plans, exceeding the global average of 75%.
This was closely followed by US companies (69%) and APAC (63%) respectively.
According to the WTW study, while most European and North American companies disclose information about metrics used in incentive plans, only 62% of APAC companies do.
In all regions, the prevalence of ESG metrics in short-term incentive plans is significantly higher than in long-term incentive plans. More than half of APAC companies use ESG metrics in their short-term plans, trailing Europe (85%) and the United States (67%).
In terms of long-term incentive plans, the number of APAC companies that incorporate ESG metrics (28%) lags behind Europe (46 per cent).
The most common measures used in APAC incentive plans are social metrics (47%), which include sub-categories such as people and HR, diversity and inclusion, and health and safety.
Three out of ten businesses (31%) include governance measures in areas such as risk management and corporate social responsibility.
Only 28% of businesses incorporate environmental measures such as climate change mitigation, carbon emission reduction, and responsible resource use.
In APAC, Australia, Japan, and Singapore have emerged as market leaders in terms of metric disclosure and the incorporation of ESG measures into executive compensation.
Among those that disclose, all companies in Australia (100%) include at least one ESG measure in their compensation plans, followed by Singapore (65%), and Japan (62%).
People and HR metrics are the most commonly used metrics in short-term incentive plans, with 89% of companies in Australia, 60% in Singapore and 19% in Japan incorporating them in their executive compensations. People and HR metrics are the most commonly used metrics in short-term incentive plans, with 86% of companies in Australia, 60% in Singapore, and 11% in Japan including them in executive compensation.
In terms of long-term incentives, companies in Japan have the highest prevalence of incorporating at least one ESG metric into incentive plans (39%), followed by Australia (19%) and Singapore (10%). Environmental and sustainability metrics are the most popular, with 22% of companies in Japan, 14% in Australia, and 10% in Singapore using them.
“While APAC got off to a slow start, we are seeing companies in the region pick up the pace in terms of ESG.”