More Apac companies include ESG metrics in exec compensation: study

Public companies in Asia-Pacific are placing greater importance on environmental, social and governance (ESG) metrics in their executive compensation programmes, a study by global advisory, broking and solutions firm WTW has found.

On Monday (Mar 20), WTW noted that 63 per cent of Apac firms use these indicators. WTW analysed 302 companies in the region, with 188 disclosing information about how ESG indicators are used in their incentive plans. The companies are listed on major stock exchanges and are included in indexes such as the S&P 500 and FTSE 100. They span industries including financial services, healthcare and real estate. 

In Apac, disclosure levels in Japan, Australia and Singapore were the highest. These countries were among seven markets analysed in the region, which also included China, Hong Kong, India and Malaysia. 

While 63 per cent of Apac companies surveyed had incorporated ESG metrics in their incentive plans, this was still lower than the global average of 75 per cent, WTW’s findings showed. 

Global leader of executive compensation and board advisory at WTW Shai Ganu said while Apac had a delayed start, companies are picking up the pace in their ESG commitments. This is particularly true for areas such as climate, human capital, and diversity, equity and inclusion. 

He added: “This underscores a growing ethos of aligning business strategies with sustainability priorities, and companies serving the best interests of all stakeholders.” 

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WTW defined environmental issues as those connected to the responsible use of natural resources and the reduction of carbon emissions. Social factors included how companies treat their workers and customers, with metrics such as employee health and safety taken into account. The study also examined how companies fared in areas such as risk management, data protection and privacy.

WTW said there were 20 companies in Singapore which disclosed details about its incentive plans, but did not name them. Of these, more than half had a social metric for executive compensation programmes, which was the most common metric used. 

Xujing Zhu, Asia and Australasia leader of executive compensation and board advisory at WTW, noted how Apac has experienced a surge in commitment to ESG indicators driven by tightening disclosure requirements from regulators. 

She said: “Pressure is clearly mounting for companies to establish an ESG agenda to remain competitive, relevant, and aligned with the priorities of their stakeholders.”