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Is the ESG trend picking up in APAC? 62% surveyed have ESG metrics in their incentive plans

Is the ESG trend picking up in APAC? 62% surveyed have ESG metrics in their incentive plans

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STI incentivisation is more popular, with 70% of companies using it to back their ESG metrics, while 22% were opting for LTI incentives.

Based on the data of companies that disclose information around incentive metrics, three in four companies (75%) surveyed by Willis Towers Watson, among a total of 1,081 globally, are using some form of environmental, social and governance (ESG) metrics in their executive incentive plans.

Of this, the highest instance is in Europe, where 91% of the 233 surveyed said so, followed by the United Kingdom at 89% of a total of 100 surveyed. In Asia Pacific, 63% of the 188 surveyed (which comprised public companies in Australia, China, Hong Kong, India, Japan, Malaysia and Singapore), said they're using ESG metrics to incentivise executives. 

Before we dive into the data, here's a quick primer on which metrics were covered under each pillar of ESG:

  1. Environmental - Issues connected to environmental sustainability, like responsible use of natural resources, climate change, pollution and the like.
  2. Social - Factors such as how a company treats its workers and customers, health and safety considerations and inclusion & diversity.
  3. Governance - A focus on topics including business ethics, board structure and independence, engagement for society, reputation and risk management.

Let's now look at the data, which showed that three in four companies surveyed globally (75%) use at least one ESG metric in their incentive plans - short-term incentives (STI), long-term incentives (LTI), or both. STI incentivisation is more popular, with 70% of companies using it to back their ESG metrics, while 22% were opting for LTI incentives.

The following is a regional comparison of the overall prevalence of ESG metrics across regions and types of plans:

esg metrics wtw

In direct linkage to HR, 64% of companies include human capital metrics in their ESG plans, of which:

  • 48% say these relate to people & HR
  • 40% say these relate to diversity & inclusion
  • 26% say these relate to health & safety
  • Notably, all of these come under the 'social' pillar of ESG. 

APAC ESG highlights

The following are some interesting data points relevant to APAC respondents:

  1. 62% of companies use at least one ESG metric in their incentive plans (STI or LTI or both).
  2. Of these, 24% of all companies use weighted stand-alone ESG metrics with quantitative measurement.
  3. 44% of companies include human capital measurements in their incentive plans, of which 'people & HR' metrics are the most commonly used at 36%.

In terms of industries, ESG metrics in APAC are most prevalent among the following sectors:

  1. Financial - 77%
  2. Energy - 75%
  3. Materials - 67%
  4. Consumer staples - 65%
  5. Industrials - 60%

Australia ESG highlights

  1. All (100%) of the 36 companies considered use at least one ESG metric in their incentive plans (STI or LTI or both).
  2. Of these, the 'social'  metric is most used, put in place by all (100%) companies.
  3. 97% of companies include human capital measurements in their incentive plans, of which 'people & HR' metrics are the most commonly used at 89%.

Japan ESG highlights

  1. 62% of the 100 companies considered use at least one ESG metric in their incentive plans (STI or LTI or both).
  2. Of these, the 'social'  metric is most used, put in place by 33% of companies.
  3. Just 31% of companies include human capital measurements in their incentive plans, of which 'people & HR' metrics are the most commonly used at 19%.

Singapore ESG highlights

  1. Three in five (60%) of the 20 companies considered use at least one ESG metric in their incentive plans (STI or LTI or both).
  2. Of these, the 'social'  metric is most used, put in place by 55% of companies.
  3. 55% of companies include human capital measurements in their incentive plans, of which 'people & HR' metrics are the most commonly used at 55%.

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