Report: Carbon-based pay incentives falling short of investor demands
A recent report by PwC and the Leadership Institute at London Business School reveals that most large European companies include carbon targets in executive pay but often fail to meet investor expectations. The study analysed the EuropeStoxx50 companies and found that 78% of them have adopted some form of carbon target in executive pay.
A recent report by PwC and the Leadership Institute at London Business School reveals that most large European companies include carbon targets in executive pay but often fail to meet investor expectations. The study analysed the EuropeStoxx50 companies and found that 78% of them have adopted some form of carbon target in executive pay.
However, these targets frequently lack proper weighting, transparency, and a clear quantitative link to the companies’ long-term carbon reduction goals.
The report evaluated the carbon targets based on four criteria: significance, measurability, transparency, and demonstrable linkage to long-term goals. Only TotalEnergies scored the maximum eight points, with a few other companies closely following. Payouts on carbon targets in 2022 averaged 86% of the maximum, with over half paying out at 100%, raising questions about the effectiveness of these targets.
The report suggests a more ambitious implementation of carbon targets, using incentives to support the push for net zero. Additionally, it emphasizes the need for investor urgency to drive best practices in aligning executive pay with climate goals.
