Major European companies are increasingly including carbon targets in executive pay packages.
A study by PwC UK and the London Business School of 50 major European corporates reveals that 78% have adopted some measure of carbon target in executive pay, while 86% have adopted environmental, social and governance measures in leaders’ remuneration policies.
Payouts in 2022 for meeting carbon targets averaged 86% of the maximum incentive, with more than half paying out 100%. The study says this “is surprisingly high given the common understanding that we’re making inadequate progress on reducing carbon emissions, which raises the question on whether the carbon targets in pay are working”.
The report, Paying for net zero: Using incentives to create accountability for climate goals, also shows that bigger carbon emitters are more likely to put carbon measures in executive pay, and “are therefore more likely to score well against investor expectations”.