ESG Performance Metrics in Executive Compensation Strategies: 2024 Edition
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CEO & Executive Compensation

ESG Performance Metrics in Executive Compensation Strategies: 2024 Edition

12 December 2024 / Report

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More than three-quarters of companies in the S&P 500 incorporate environmental, social & governance (ESG) performance measures into their executive incentive plans, according to 2024 disclosures, up from two-thirds in 2021. This report analyzes the focus areas and methods of integration of ESG metrics into performance measurement across both the S&P 500 and the Russell 3000.

Key Insights

  • Companies continue to link executive compensation to ESG performance despite the recent pushback against ESG, with 77.2% of S&P companies incorporating ESG performance into executive compensation design in 2024, down marginally from 77.8% in 2023.
  • ESG measures, particularly strategic scorecards, have seen significant growth, doubling in use across both the S&P 500 and Russell 3000 alongside increased adoption of stand-alone and individual metrics.
  • Human capital management remains the most widely used ESG metric category, while environmental metrics saw rapid growth from 2021 to 2023 before leveling off in 2024 amid growing ESG pushback.
  • The use of diversity, equity & inclusion (DEI) metrics declined between 2023 and 2024, although a closer analysis suggests a shift in how DEI is being assessed: moving from individual performance assessments to stand-alone and strategic scorecard measures.
  • While growth in the use of ESG metrics in long-term incentives has slowed, growth in their use in a combination of both short- and long-term incentives is increasing.

More than three-quarters of companies in the S&P 500 incorporate environmental, social & governance (ESG) performance measures into their executive incentive plans, according to 2024 disclosures, up from two-thirds in 2021. This report analyzes the focus areas and methods of integration of ESG metrics into performance measurement across both the S&P 500 and the Russell 3000.

Key Insights

  • Companies continue to link executive compensation to ESG performance despite the recent pushback against ESG, with 77.2% of S&P companies incorporating ESG performance into executive compensation design in 2024, down marginally from 77.8% in 2023.
  • ESG measures, particularly strategic scorecards, have seen significant growth, doubling in use across both the S&P 500 and Russell 3000 alongside increased adoption of stand-alone and individual metrics.
  • Human capital management remains the most widely used ESG metric category, while environmental metrics saw rapid growth from 2021 to 2023 before leveling off in 2024 amid growing ESG pushback.
  • The use of diversity, equity & inclusion (DEI) metrics declined between 2023 and 2024, although a closer analysis suggests a shift in how DEI is being assessed: moving from individual performance assessments to stand-alone and strategic scorecard measures.
  • While growth in the use of ESG metrics in long-term incentives has slowed, growth in their use in a combination of both short- and long-term incentives is increasing.
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Authors

Paul Hodgson

Paul Hodgson Paul Hodgson

Senior Contributor, Governance, ESG Center
ESGAUGE - ESG Intelligence & Analytics

Read Bio

Andrew Jones, PhD

Andrew Jones, PhD Andrew Jones, PhD

Senior Researcher, ESG Center
The Conference Board

Read Bio

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