Remuneration and sustainability

In the second half of 2011, a group of 11 PRI signatories representing over $1.3 trillion of AUM, decided to collaborate to better understand current challenges and opportunities to link ESG metrics to executive compensation. The group set out with a shared belief that, considering the influence of ESG factors on corporate performance and reputation, including ESG issues within executive incentive schemes is an important factor in the creation and protection of long-term shareholder value.

After two workshops between investors, service providers and a group of UNGC LEAD and other companies, the group agreed to develop a guidance document which could be used as a tool for investor-company dialogue. The group held in depth conversations with five companies to better understand their current practices: BHP Billiton, Eskom, Intel, National Australia Bank and Stockland. The collaboration culminated in a guidance document published in June 2012 which provides practical examples of emerging good corporate practices across various regions and sectors, and includes recommendations on how to identify appropriate ESG metrics, link them meaningfully to executive pay and provide sufficient disclosure to investors.