Considering sustainability in investment decisions is becoming more important for investors. That is why companies are implementing sustainability strategies. Impacts on the environment, society and corporate management should be part of corporate decision-making (e.g. reducing the CO2 footprint, fostering employee health, strengthening diversity at the management level). An effective tool for the implementation of such strategies is the design of compensation systems. Incentives can influence the behavior of employees, and in particular, executive management.
To analyze the inclusion of ESG criteria in remuneration models we evaluated data from 169 Swiss companies and 2,320 companies (ca. 80 % of MSCI ACWI) worldwide. The analysis is based on information published by companies in their annual, remuneration and sustainability reports, as well as information disclosed in voluntary databases such as the Carbon Disclosure Project (CDP). A potential distortion cannot be ruled out with respect to companies that have incorporated ESG criteria in their remuneration systems, but do not report on it. The application of ESG criteria in Switzerland, worldwide and in industry comparison is analyzed in the article below. Furthermore, the topical areas of ESG criteria in remuneration systems that companies currently incorporate in their respective remuneration systems are depicted.