How the S&P 500 uses ESG metrics for CEO incentives

This memo from Meridian Compensation Partners benchmarks the use of ESG-related metrics in short- and long-term incentives granted to CEOs at S&P 500 companies over the last year. Here’s an excerpt:
73% of S&P 500 companies report at least one ESG metric in STI and/or LTI plans in 2024 proxy (unchanged from 2023)
• Overall, practices related to ESG are largely unchanged from last year• Overwhelmingly, ESG are used in STI; only 11% include ESG in LTI awards
• Prevalence of E, S, and/or G metrics ranged from 56% to 95% by industry sector
• Method of using ESG metrics tends not to be as stand-alone/weighted metrics but rather as either broad scorecards or as qualitative individual performance assessments
‒ 52% use Business Strategy Scorecards
‒ 44% as part of Individual Performance Assessments
‒ 38% as Standalone ESG Metrics• Anecdotally, we know companies becoming somewhat more cautious with DEI metrics
‒ Less quantitative
‒ More subjectivity/judgment
‒ Some changes in terminology, e.g., “talent development” rather than DEI