Below are the Key Takeaways from ISS Governance Solutions’ thought leadership paper “A New Yardstick for Pay: Environmental & Social Factors.” The full paper is available for download from the Institutional Shareholder Services (ISS) online library.
- The uptick in the use of E&S performance metrics in compensation observed over the last two years appears to be driven by societal developments like climate change awareness, #MeToo, BLM, and COVID-19
- Social metrics like worker safety dominate but the growth rate of environmental metrics is higher, signifying increased importance
- Safety metrics remain most common, although climate change and diversity-related metrics experienced the biggest upswings
- Diversity, CSR, and staff-relations metrics were used across all sectors in 2020
- The utility sector has the highest prevalence of E&S metrics, although the real estate sector and consumer staples experienced the biggest jumps of late
- E&S metrics are included in STIPs more often than LTIPs, with large cap companies leading the way
- Companies that include E&S metrics in executive compensation plans often choose to include more than one such metric