Most companies will likely link executive pay to environmental targets: ING survey

By Jim Tyson for CFODIVE.com

Spurred on by the pandemic, most companies are accelerating their “green transformation” and plan to tie executive pay to environmental goals, ING said in an ESG survey.

• The pandemic has prompted 57% of companies to speed up efforts to reduce their impact on the climate and 62% will probably link executive pay to environmental targets this year, according to an ING survey of 450 companies across seven sectors in the U.S., Europe and Asia-Pacific.

• Thirty-three percent of companies rated safeguarding employee health and well-being as a “very high priority,” with 32% ranking sustainable supply chains and innovation in “green” production or services as top priorities as well, ING found in the survey   

• “The pandemic has demonstrated that individuals, companies, investors and governments can make rapid environmental and social changes for the good, but closer alignment is necessary to rapidly accelerate progress in addressing the climate crisis,” ING Americas CEO Gerald Walker said in a statement.

During the past several months regulators and investors in several countries have intensified scrutiny of corporate policy toward environmental, social and governance (ESG) issues. Across the three regions surveyed by ING, 72 out of 100 institutional investors and family offices said they are seeking better ESG outcomes in their portfolios.

In the U.S. the Securities and Exchange Commission (SEC) has sharpened its focus this year on ESG matters across its oversight and operations. Acting SEC Chair Allison Herren Lee said last month that companies should disclose political donations so that investors can gauge adherence to ESG principles.

The Division of Examinations mentioned climate-related risks first in its description of priorities for 2021, and the Division of Corporation Finance plans to give more attention to climate-related disclosure.  

The SEC will also examine proxy voting practices “to ensure voting aligns with investors’ best interests and expectations” and companies’ “business continuity plans in light of intensifying physical risks associated with climate change,” Lee said on March 3.

The Enforcement Division last month announced the creation of a Climate and ESG Task Force made up of 22 members from SEC headquarters, including the Office of the Whistleblower, as well as regional offices and “specialized units” within the division.

“The pandemic is undoubtedly a wake-up call for political, corporate and investment leaders,” ING said in the survey report. “In an increasingly interconnected and complex world, they must step up their actions to mitigate global systemic risk or face disastrous consequences.”

Half of the companies surveyed plan to issue a social impact bond during the next 12 months, with Asia-Pacific companies more likely to do so than their counterparts in the U.S. and Europe, ING said.

Sixty-two percent of companies say ESG information is strongly integrated in their reporting, according to ING. Yet 45% of Europe-based companies identified shifts in ESG key performance indicators as the biggest challenge to improving ESG accountability, compared with 34% in both the U.S. and Asia-Pacific.

As companies prepare “for the risks ahead — future pandemics, climate change, social turbulence — their progress on sustainability practices is under the microscope like never before,” ING said.

Several groups are pushing for the adoption of different ESG reporting standards, complicating efforts by companies to achieve uniformity and ensure buy-in by stakeholders. The organizations include the Sustainability Accounting Standards Board (SASB), the Global Reporting Initiative (GRI) and the Task Force on Climate-related Financial Disclosures (TCFD).

Lee pledged last month to cooperate with Treasury and other financial regulators inside and outside the U.S. in setting international sustainability standards.