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The board should ensure that executive incentives are aligned to promote the long-term prosperity of the company. The board may want to consider including climate-related targets and indicators in their executive incentive schemes, where appropriate. In markets where it is commonplace to extend variable incentives to non-executive directors, a similar approach can be considered.
Guiding questions
- Is the company’s management incentivisation scheme designed to promote and reward sustainable value creation over time?
- Are any climate targets and/or goals integrated into management’s incentivisation model?
FEATURED RESOURCE
Bringing together ESG: Board structures and sustainability
To govern effectively, boards must embrace environmental, social and governance (ESG) matters to ensure they are well positioned to meet accelerating ESG risks and opportunities, as well as the increasing demand for ESG action from investors and stakeholders.
Resources
[Source: to see more background on this principle and further guiding question, see the World Economic Forum Guide: How to Set up Effective Climate Governance on Corporate Boards: Guiding principles and questions, p15]
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