There has been a dramatic increase in ESG-linked compensation schemes in both the U.S. and Europe. As the investor expectation and regulatory frameworks evolve, the expectation placed on companies to clarify the links between their ESG targets and compensation is likely to intensify.

November 17, 2023

Incentivizing What Matters 2.0: A Cross-Continental Review of Sustainability-Linked Executive Incentives

incentivizing what matters 2.0

Below is an excerpt from ISS-Corporate’s recently released paper “Incentivizing What Matters 2.0: A Cross-Continental Review of Sustainability-Linked Executive Incentives”. The full paper is available for download from the ISS-Corporate online library.

The use of sustainability-linked targets in executive compensation schemes continues to spread among U.S. and European companies.

ESG targets represent a growing percentage of overall pay opportunities for executives in both short-term long-term incentives. However, many questions remain over transparency, their effectiveness and how and when they are used.

In this report, ISS-Corporate examined sustainability incentive trends in the U.S. and Europe to show how they have progressed since our previous report in 2021 and to explore common hurdles to building effective performance metrics that align executive incentives with sustainable long-term value creation.


  • In More than 80% of STOXX 600 and 55% of S&P 500 companies explicitly disclosed ESG metrics as a part of executive pay, up from 59.4% and 22% in 2021.
  • Sectors with significant social and environmental footprints are more likely to incorporate ESG considerations into their pay program, with Utilities, Energy, and Materials sectors leading the way.
  • ESG metrics are more common in STI than LTI, and only 7.6% of S&P 500 companies and 2.4% of Russell 3000 (excluding S&P 500) having an ESG metric in LTI compared to 49.5% among STOXX 600 companies.
  • While European companies utilize more Environmental metrics than their U.S. peers, such metrics are gaining popularity in both continents.


Jun Frank, Global Head of Compensation & Governance Advisory, ISS-Corporate
Stephan Stegmueller, Head of Compensation & Governance Advisory, EMEA and APAC, ISS-Corporate
Yan Xu, Senior Adviser, EMEA, ISS-Corporate
Fredrik Lundin, Senior Sustainability Solutions Product Manager, ISS-Corporate

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