ESG Measures in Asia Pacific Executive Incentive Plans Gaining Momentum Study Finds

Public companies in Asia-Pacific (APAC) are catching up with their global counterparts in incorporating Environmental, Social and Governance (ESG) measures in their executive compensation programmes, according to a new study by global advisory, broking and solutions company WTW.

Based on the companies that disclose information on the use of incentive metrics, European companies continue to lead the pack with 91% using at least one ESG metric in their incentive plans, exceeding the global average of 75%.

This was followed by U.S. companies at 69%, with APAC closely behind at 63%. The study also shows that whilst most European and North American companies disclose information about metrics used in incentive plans, only 62% of APAC companies did so.

Overall, the prevalence of ESG metrics in short-term incentive plans is significantly higher than long-term incentive plans across all regions. More than 50% of companies in APAC incorporate ESG metrics in their short-term plans, behind Europe (85%) and U.S. (67%) companies. For long-term incentive plans, the number of APAC companies (28%) that incorporate ESG metrics remains behind Europe (46%).

The most prevalent measures that APAC companies use in incentives plans are social metrics (47%), which include sub-categories such as People and HR, Diversity and Inclusion, as well as Health and Safety.

Three in 10 companies (31%) incorporate governance measures in areas such as risk management and corporate social responsibility. Only 28% of companies incorporate environmental measures, including climate change, carbon emissions reduction, and responsible use of natural resources.

“WTW’s latest research highlights growing prominence within companies globally in aligning ESG priorities to executive incentive programmes. While APAC had a delayed start, we are seeing companies in the region pick up the pace in their ESG commitments, particularly in areas such as climate, human capital and DEI (Diversity, Equity and Inclusion), as well as broader corporate governance measures,” said Shai Ganu, Managing Director and Global Practice Leader, Executive Compensation and Board Advisory, WTW.

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

Of the top 300 leading companies in APAC, 188 companies disclosed the metrics they use in incentive plans. Among these 188 companies that were included in the study were public companies in Australia, China, Hong Kong, India, Japan, Malaysia and Singapore.

In the region, Australia, Japan, and Singapore have emerged as market leaders in the disclosure of metrics used and the integration of ESG measures into executive incentives. Among those that disclose, all companies in Australia (100%) incorporate at least one ESG measure in their compensation plans, followed by Singapore at 65% and Japan at 62%.

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