How carbon reductions are starting to be factored into executive pay

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Here’s the intro from this piece by As You Sow’s Rosanna Weaver:

As a fundamental driver of change to achieve global Net Zero by 2050 goals, As You Sow has begun to analyze the specifics of whether and how companies include greenhouse gas (GHG) emissions reduction targets as separate, explicit metrics in their executive compensation plans. Investors believe that linking climate performance and greenhouse gas (GHG) emission reduction targets to executive pay is a critical way for corporate boards of directors to incentivize companies to stay on track to achieve short, medium, and long-term emission reduction goals.

While our analysis is ongoing, we thought it useful to report initial findings as to where companies are in the process of bringing climate change metrics into pay packages and/or improving current climate-related metrics. We focused on disclosures made in the proxy statements of 48 mostly large carbon emitters. The key takeaways from our initial research are:

– Few of the companies surveyed make the attainment of specific GHG reduction targets an explicit element of executive pay.

– Some companies refer generally to attaining long-term GHG reduction goals, but with limited details by which to measure attainment, and more state that one element of executive pay is the attainment of sustainability, environmental, or operational safety goals, without providing sufficient details as to particular measures or relative weights between the various components.

– Universally, GHG reductions appear to count for a very small portion of total executive compensation, even among companies that make more specific disclosures.

The tide appears to be turning, however, based on the considerable pressure from shareholders for more and better disclosure. As indicated below, several of the proxy statements we examined for the 2021 annual meetings indicate that their company has adopted new policies for future years.