Environmental, Social, and Governance ESG – Driven Executive Remuneration

• FastrackGovind
• articles by interns
• January 31, 2025

ESG-Driven Executive Remuneration

Abstract to ESG

Environmental, Social, and Governance (ESG) metrics integration into executive remuneration has become a central component of modern corporate governance. With the growing pressure from stakeholders on organizations to adopt sustainability, executive pay aligned with ESG goals is now becoming more prominent. It helps leaders to not only perform financially but also to deliver long-term value creation that reflects environmental stewardship, social responsibility, and sound governance practices. This study explores the relationship between ESG metrics and executive remuneration, exploring the driving role of organizational goals. Executive incentives tied to ESG outcomes can help better align company strategies with global sustainability objectives and stakeholder expectations. The analysis delves into such benefits as enhanced corporate reputation, improved stakeholder trust, and risk mitigation. However, it also acknowledges various challenges, such as the problem in defining measurable ESG goals, potential conflict between achieving short-term financial performance goals and long-term sustainability, and divergent regulations around the world. Emerging regulatory and voluntary frameworks include what the EU[1] is implementing about Corporate Sustainability Reporting Directive and where standardized ESG metrics start to be adopted more widely than ever. All these tend to indicate a greater level of accountability and transparency in their executive pay practices. The findings underscore that ESG-driven remuneration fosters a culture of long-term sustainability, aligning corporate leadership with broader societal and environmental goals. By integrating ESG factors into executive compensation, organizations can drive positive change, mitigate risks, and create lasting value for all stakeholders.

Introduction

In today’s corporate scenario, ESG considerations become a fundamental component of a sustainable business practice. Essentially, ESG encompasses the three dimensions: environmental as the fight against climate change and the consumption of fewer resources; social, representing fair labor practices, involvement with the community, and human rights; and governance, which brings together ethical leadership, transparency, and accountability. Together, these elements guide organizations in building value that extends beyond pure financial performance to encompass also societal and environmental well-being. Executive remuneration, defined traditionally as the reward paid to senior executives, has been an important focus of corporate governance for many years. Traditionally, it includes a fixed component, such as salary, and a variable component, such as bonus, stock options, and long-term incentive plans (LTIPs). Traditionally, the pay for executives was determined based on factors such as financial performance, market benchmarks, and shareholder expectations. The focus has been on aligning executives’ interests with those of shareholders, ensuring that management drives profitability and value creation. However, as stakeholders increasingly demand accountability for environmental and social impacts, the linkage between executive remuneration and ESG metrics has gained significant traction. ESG-linked executive pay involves integrating sustainability objectives into compensation structures to encourage leaders to prioritize non-financial performance alongside traditional financial targets. For example, a CEO’s bonus could be dependent on carbon neutrality or the diversity of an organization. This not only aligns with emerging global priorities but also reflects a shift toward long-term sustainability as a key determinant of corporate success.

Evolution of Executive Remuneration

Executive remuneration has seen tremendous changes over the decades, from simple salary-based compensation to complex, performance-driven pay structures. This evolution is reflective of changes in economic landscapes, corporate governance philosophies, and societal expectations of corporate leadership. In the early 20th century, executive remuneration was mainly based on fixed annual salaries without much volatility. The corporate structures back then were less complex. The role of executives, at that time, was more managerial rather than strategic. Bonuses or incentives were not as common at that time, and their focus was on steady growth in business rather than achieving shareholder value. Remunerations practices began to change from post-war economic boom. As companies expanded and capital markets, shareholders started demanding greater accountability and alignment between corporate leadership and financial performance. During the 1970s, bonuses and other types of incentive pay became much more common, indicating that the practice of rewarding executives for specific business outcomes had begun.

Rise of Performance-Based Pay

Performance-based pay started to rise in the 1980s and 1990s due to globalization, increased competition, and rising institutional investors. Stock options, equity grants, and long-term incentive plans emerged as core elements of executive compensation. These instruments were intended to align the interest of executives with those of shareholders by linking a major part of their pay with company performance, often defined by financial metrics like earnings per share (EPS), revenue growth, and return on equity (ROE). Performance-based pay gained significant momentum with the corporate governance movement in the 1990s. That movement was based on notions of transparency, accountability, and agency problem mitigation. Compensation committees started tying incentives to measurable outcomes so that executives would focus more on profitability and shareholder returns. However, this was a period where short-termism was also revealed because of some executives who made quick gains but not necessarily sustain them over time.

Introduction of Non-Financial Metrics

Starting with the early 2000s, there was a rising wave of interest in the adoption of non-financial metrics into executive pay structures in light of growing CSR and sustainability awareness. Corporate scandals, such as Enron and WorldCom, revealed the need for effective governance frameworks and ethical leadership, thus leading to organizations to begin including governance-related metrics in performance evaluations, especially those related to compliance with ethical standards and risk management. It had developed to the point in the 2010s where companies also began experimenting with tying executive pay to goals like cutting carbon emissions, increasing diversity in the workforce, and enhancing community engagement. It gained a boost after the Paris Agreement in 2015 and the SDGs by the United Nations in the adoption of sustainable development goals to align business objectives with the global sustainability objective.

The unevenness of ESG-linked pay adoption among industries and regions does not, however, obscure a very important change in executive remuneration: it marks a new way of thinking about corporate success in terms of long-term value creation that is not solely financial but also environmental and societal. As stakeholders push for greater accountability, integrating non-financial metrics into pay structures continues to change, opening the way to more sustainable and responsible leadership.

ESG Metrics and Executive Remuneration

ESG metrics[2] are a framework of evaluating a company’s long-term sustainability and its effect on society, the environment, and its internal governance. The metrics give an overview of a company’s performance, beyond financial measures, which captures the wider value created for stakeholders: employees, customers, shareholders, and the environment.

Environmental metrics focus on the impact of a company on the planet. That involves reducing carbon emissions, consumption of energy, water use, waste management, and conserving biodiversity. There is a growing scrutiny over the management of resources of a company and its contributions towards the fight against climate change. ESG-based compensation packages may motivate top management to achieve certain environment objectives, such as reaching carbon neutrality or reducing the usage of water per unit of output.

Social metrics concern a company’s influence on its stakeholders, including the workforce, communities, and consumers. This includes workforce diversity, employee health and safety, community engagement, and consumer protection. For instance, executive compensation may be directly linked to improving employee satisfaction or achieving diversity and inclusion targets. The social aspect also encompasses a firm’s involvement in broader issues that affect society, including human rights and philanthropy. Therefore, it is also an important metric for executives.

Governance metrics focus on how companies are run, including leadership quality, transparency, and accountability. Governance metrics often include board composition, executive compensation practices, ethical conduct, and regulatory compliance. Linking executive pay to governance criteria can incentivize leaders to adopt more transparent and ethical decision-making processes and ensure that company policies are aligned with stakeholder interests.

The increasing relevance of ESG metrics reflects the increasing recognition of the fact that sustainable, responsible business practices are essential to long-term success. Thus, by incorporating these elements into executive pay, the company can ensure that executive incentives are aligned with broader value creation for all, not just shareholders.

Case Studies of ESG Impacting Executive Pay Structures[3]

This integration of ESG metrics into executive remuneration has been most apparent in the last few years, wherein many companies have adopted ESG-linked pay. Most notably, Unilever has integrated sustainability targets in its executive compensation structure by linking a portion of its executive bonuses to meeting some environmental and social goals in reducing carbon emissions and further improving the lives of millions through its social initiatives. This aligns executive incentives with long-term sustainability, rather than just short-term financial performance.

For example, the software company Microsoft has tied executive compensation to environmental goals such as achieving carbon neutrality. In its case, the bonus package of Microsoft’s chief executive and other top executives will depend on specific environmental performance targets, such as carbon negativity by 2030. This means that including environmental and social metrics, in addition to financial performance, will ensure that these companies’ leadership continues to focus on delivering value to benefit both the business and society. BlackRock, a global investment management firm, has also spoken about the role of ESG in executive remuneration. In 2020, Larry Fink, the CEO of BlackRock, stated that ESG factors are critical to investment decisions and asked companies to “embed purpose and sustainability into every aspect of the enterprise.” BlackRock has also increasingly voted in favor of shareholder proposals demanding that ESG metrics be included in executive compensation plans. This nudges companies to tie executive incentives to measurable ESG outcomes. These case studies reflect how organizations are slowly getting on board with the practice of executive pay being linked with ESG goals to make sure that leaders are encouraged to create long-term and sustainable value rather than focusing on maximizing short-term financial gains.

ESG-Linked Incentives[4]: Short-Term vs. Long-Term Compensation

Short-term and long-term compensation fall under ESG-linked incentives, and they have different roles in encouraging executives to meet sustainability goals.

Short-term incentive compensation Short-term incentives, for instance, are usually aligned with very specific and immediate ESG targets, such as the percentage decrease in carbon emissions or increase in employee satisfaction scores. Short-term ESG-linked incentives can thus be immediately rewarded by completing a target within one year. In this case, an executive may be compensated by bonuses for having put up a diversity program that resulted in increasing women in leadership positions in a firm. These short-term incentives are essential to keep executives focused on delivering quick wins that are in line with sustainability goals.

Long-Term Compensation: Long-term incentives, such as stock options or performance shares, are tied to more enduring ESG goals that are in line with a company’s broader sustainability vision. These may include net-zero emissions or a more diverse and inclusive workforce over three to five years. Long-term ESG-linked incentives help executives keep their focus on sustainable strategies that may take more time to materialize but are the most important factors for long-term growth and resilience. For instance, a CEO might receive performance-based stock options if the company is able to achieve its long-term environmental goals, like reducing its carbon footprint by 50% in five years.

While both short-term and long-term ESG-linked incentives can complement each other by yielding immediate results and driving long-term, sustainable business practices, it is crucial to strike a balance between these two forms of compensation in order not to over-emphasize short-term goals at the expense of long-term sustainability.

Regulatory Framework and Guidelines

As the integration of ESG metrics into executive remuneration gains momentum, several regulatory frameworks and guidelines have emerged to guide companies and investors in adopting sustainable practices. These frameworks aim to standardize ESG reporting, improve transparency, and promote responsible corporate governance.

EU Taxonomy: The EU Taxonomy is a classification system that defines environmentally sustainable economic activities. It is part of the EU’s overall sustainable finance agenda, aimed at steering capital flows towards sustainable investments. Within this framework, companies must report how their activities support environmental sustainability goals, such as mitigation and adaptation to climate change. In the context of ESG-linked executive pay, Taxonomy is very relevant as it enables clear setting of environmental objectives for companies. EU-based companies are actually encouraged to link executive pay to such sustainability goals that ensure the leadership is motivated to meet these defined climate targets. In fact, the Taxonomy constitutes a part of the European Green Deal, aiming at a carbon-neutral economy by 2050. Thus, these policies are bound to touch remuneration policies oriented toward environmental metrics.

SEC Guidelines: In the United States, the Securities and Exchange Commission (SEC) has provided guidance on ESG disclosures, including the requirement for companies to report material risks related to ESG factors in their annual filings (e.g., 10-K reports). While the SEC does not mandate specific ESG-linked executive compensation practices, it emphasizes the importance of transparent reporting on how ESG factors influence executive pay. The SEC proposed rules regarding disclosing how companies’ policies for board and executive compensations align with their sustainability strategies in the year 2020. The disclosure would include information concerning performance metrics and goals that are tethered to ESG goals. This way, focus by the SEC on providing transparency will enable shareholders to review whether executive pay should be tied to long-term sustainability goals.

UN Principles for Responsible Investment (PRI): The UN PRI is a global initiative that encourages investors to incorporate ESG factors into their investment decision-making processes. It provides a set of six principles designed to guide institutional investors in promoting sustainable business practices. While PRI primarily targets investors, its influence extends to executive remuneration policies as well. Signatories to the PRI are encouraged to engage with companies on ESG issues, including executive pay. By aligning their investment strategies with ESG principles, institutional investors can pressure companies to adopt ESG-linked pay practices. This, in turn, creates a more sustainable approach to executive compensation, ensuring that companies are held accountable for their environmental, social, and governance performance.

Comparative ESG Remuneration Practice Across Jurisdictions[5]

The integration of ESG metrics in the executive remuneration differs significantly across jurisdictions. The rationale is based on varying requirements and pressures from regulatory bodies, investor priorities, and the overall norms of corporate governance.

Europe: The EU is one of the most developed regions in linking executive remuneration to ESG factors. Under the EU Corporate Sustainability Reporting Directive, companies are required to report how their executive pay relates to sustainability goals. This disclosure is part of a broader push for transparency in ESG reporting. European companies, especially those based in countries like France and the Netherlands, are increasingly adopting ESG-linked pay practices. For instance, in 2020, the French energy firm Total declared that it will tie a part of its executives’ bonuses to its environmental performance, such as achieving net-zero emissions by 2050. The regulatory environment of the EU and increasing public pressure for sustainability practices make it a frontrunner in ESG-driven remuneration.

United States: In the United States, ESG-linked executive compensation has been slower to be mandated. Though the SEC has issued guidelines encouraging firms to disclose ESG-related risks, it does not tie the payment structure of executives directly to their ESG performance. Large companies in the United States have implemented such pay structures voluntarily; among them are those dealing in technology and energy products. For example, Microsoft and Amazon have included environmental goals in the compensation package for their executives. Despite these examples, the United States does not have a standard regulatory mechanism for mandating such practices, and thereby experiences vast variations in how the concept of ESG can be integrated into executive pay.

Asia-Pacific: The Asia-Pacific is quite mixed. Not only in Japan and South Korea have significant developments of integrating ESG with pay resulted in substantial pressure that mainly has come from within. In Japan, for example, the Tokyo Stock Exchange has issued guidelines requiring firms to disclose how their executive compensation policies support long-term shareholder value. Such long-term shareholder value frequently includes ESG metrics. This trend is still in its early stages in emerging markets, such as India and China. These countries are beginning to realize the importance of sustainability, but comprehensive regulatory frameworks for ESG-linked executive pay are still in development.

Emerging markets. ESG-driven pay practices are still relatively underdeveloped in emerging economies. Global pressure from investors and international regulatory bodies is gradually encouraging these markets to adopt more sustainable approaches to corporate governance. Companies in these regions are increasingly facing demands from institutional investors and NGOs to incorporate ESG metrics into their executive pay structures.

Benefits and Challenges of ESG-Driven Executive Pay[6]

Benefits of ESG-Driven Executive Pay

1. Promotes Sustainable Decision-Making

The most important advantage of embedding ESG metrics into executive remuneration is the fact that it encourages sustainable decision-making at the highest echelons of management. With executive compensation tied to environmental, social, and governance outcomes, executives tend to focus on long-term sustainability rather than short-term financial gains. For instance, the executives rewarded for reducing carbon emissions, improving labor conditions, or enhancing corporate governance practices will naturally focus their decision-making on initiatives that have a long-term positive impact both on the company and on society. Such a shift from short-term profit maximization to long-term value creation aligns corporate strategies with global sustainability goals, such as the Paris Agreement on climate change and the UN Sustainable Development Goals (SDGs).

This long-term orientation helps companies to mitigate risks associated with environmental degradation, social inequality, and poor governance practices, which otherwise could undermine their competitive position and market stability. Additionally, the incorporation of ESG metrics encourages executives to pursue innovative solutions that include sustainable practices in core business operations, creating a responsible leadership culture that can positively ripple throughout the organization.

2. Improves Shareholder Value and Corporate Reputation

A company’s reputation and brand image in today’s increasingly conscious consumer and investor landscape depend highly on its commitment to ESG principles. Companies that can be described as responsible corporate citizens will attract loyal customers, retain top talent, and gain favorable treatment from investors. Therefore, linking executive remuneration to ESG performance is a sign of a company’s commitment to sustainable business practices that could ultimately lead to shareholder value increases.

For example, companies that focus on environmental sustainability or social responsibility may benefit from a competitive advantage in attracting ESG-focused investors. In fact, as institutional investors increasingly focus on sustainable practices, companies with strong ESG credentials are likely to command higher market valuations. This is particularly evident in the rise of ESG-focused investment funds, which seek to invest in companies that are performing well on sustainability metrics. Thus, tying executive pay to these metrics not only supports long-term value creation but also enhances the company’s reputation and attractiveness to shareholders.

3. Aligns Executive Goals with Stakeholder Interests

ESG-driven executive pay helps align the goals of corporate leaders with the broader interests of stakeholders, including employees, customers, communities, and investors. Traditionally, executive compensation has had a close linkage to financial performance through stock price and profitability. However, this sometimes results in shareholder-friendly decisions at the short-term expense of other stakeholders, such as workers, consumers, or the environment. By incorporating ESG considerations into compensation, firms are able to motivate executives toward considering the interests of other stakeholders rather than being primarily focused on financial metrics.

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For instance, tying executive compensation to diversity and inclusion targets can motivate a company to become more inclusive and increase employees’ and community returns. Similarly, the more rewarding executives are for improvement in environmental sustainability, the greater their practices to reduce a company’s ecological footprint are going to be. And it will contribute positively towards society. This approach in the long run strengthens not only the stability of a business but also encourages social responsibility through a shared purpose.

Challenges of ESG-Driven Executive Pay

1. Inability to Set Measurable ESG Targets

One of the main challenges when using ESG-driven executive pay is the challenge of having clear, measurable, and comparable ESG targets. ESG factors are typically qualitative and multi-dimensional in contrast to the straightforward and easily quantifiable nature of financial metrics such as profit margins or stock price. Environmental performance, social responsibility, and governance practices vary so widely based on the sector, geography, and specific goals of the company that it can be hard to set universally applicable metrics.

For instance, a renewable energy company would focus on carbon reduction as its prime ESG goal, while a manufacturing company would focus more on waste reduction or labor practices. The diversity of ESG metrics across different industries complicates the process of creating standardized targets for executive pay. Additionally, measuring the effectiveness of ESG initiatives can take time, and it is challenging to assess the direct impact of an executive’s decisions on long-term sustainability outcomes.

Furthermore, it could allow companies to set ESG goals as low-hanging fruits such that they don’t leave a meaningful footprint for their sustainability, thereby lessening the impact of incentives connected with these goals. Consequently, the absence of standardized measuring tools is an outstanding blocker to the popular use of ESG-led remunerations.

2. Risks of Greenwashing or the superficial adoption of ESG[7] :

The second critical challenge of ESG-linked executive compensation is the threat of greenwashing. In this, a company would be claiming to be more sustainable or responsible than it is. Companies, in a bid to better their public image or fulfill investor demand, may just go on paper with ESG metrics without changing much about their practice. This becomes very tricky when the ESG targets are vague, unmeasurable, or do not reflect the operations of the company.

For instance, an organization may adopt a pledge to reduce the carbon emissions but set it so minimal that it may not contribute substantially to environmental purposes. The companies may create tokenistic diversity initiatives targeting social results while not eradicating systemic inequalities that exist in their workforce. If executive pay is linked to such superficial ESG efforts, it could undermine the credibility of ESG-driven compensation and lead to a public backlash. To avoid greenwashing, companies must ensure that their ESG targets are specific, measurable, and genuinely aligned with sustainable business practices.

3. Resistance from Traditional Corporate Boards

Many traditional corporate boards and executives remain resistant to the integration of ESG metrics into executive pay. For this purpose, executive compensation has remained the yardstick for financial performance and shareholder value, with negligible concern for broader social and environmental issues. Corporate boards therefore see ESG-driven pay as a non-essential or even counterproductive concept in relation to business aims. This resistance is the most significant in industries which, for a long period of time, have seen profits achieved at the expense of the future, such as the fossil fuels sector, for instance, or heavy industry.

Some executives may also argue that tying their pay to ESG metrics infringes on their ability to make independent decisions. The complexity of balancing ESG goals with financial performance may also be seen as an unnecessary complication in an already demanding business environment. This requires a cultural shift from companies and strong leadership from both board members and investors toward demonstrating the long-term value that ESG integration in executive compensation brings.

Future of ESG-Driven Executive Remuneration

Emerging Trends in ESG Metrics and Their Integration into Remuneration Policies

The inclusion of ESG metrics in executive remuneration is highly evolving, with increased emphasis on bringing corporate leadership into alignment with long-term sustainability goals. The most emerging trend of all is that ESG metrics are being changed to a more holistic and multidimensional perspective, beyond just the environmental performance and incorporating the social and governance factors as well. In particular, organizations are increasingly adopting broader social goals such as DEI and improving community well-being, alongside environmental sustainability measures like carbon neutrality and waste reduction.

In addition, there is growing recognition of the need to integrate these ESG metrics into LTIPs. More companies are now moving away from short-term rewards tied to quarterly financial results and instead focus on sustainable and measurable ESG outcomes that are assessed over several years. This shift ensures that executives are incentivized to make decisions that benefit the company and society in the long run rather than focusing on short-term gains that may harm the environment or society.

This trend is accompanied by companies increasing their transparency and accountability by setting and reporting on specific, quantifiable ESG targets, which will be used to assess executive performance. There is also an emphasis on aligning ESG metrics with shareholder value to ensure that executives are incentivized to pursue strategies that create both long-term financial and societal value.

Role of AI and Technology in Tracking and Analyzing ESG Performance

The evolution of AI and technology has transformed how companies monitor and track their ESG performance to effectively integrate into executive remuneration. This will allow the gathering of huge volumes of real-time data, collected using data analytics platforms enabled by AI, concerning various factors like environmental, social, and governance. It facilitates better performance tracking with a more accurate and transparent picture.

For example, AI can help companies assess carbon emissions, track supply chain sustainability, and monitor diversity metrics more efficiently. Machine learning algorithms can also help identify patterns in ESG performance, providing insights into areas where executives can make improvements to meet their targets. These technological advancements make it easier for companies to link ESG data directly to executive compensation, providing real-time feedback on how well executives are meeting sustainability and social responsibility goals.

Moreover, technology also allows for more standardized and comparable ESG reporting. As companies continue to increasingly utilize similar technologies in tracking their ESG, the basis of performance comparison between industries will become easier and therefore will standardize more in the linkage of ESG and executive pay.

Conclusion

ESG-driven executive remuneration becomes increasingly a modern shape in corporate governance, as their incentives are aligned with sustainable goals for the long term. Incorporating ESG metrics in compensation ensures that executives not only care about financial performance but social responsibility and environmental stewardship are equally considered. This adjustment answers the growing demands by investors, employees, and consumers that businesses be seen as positive contributors to society and remain profitable. ESG-linked pay structures motivate executives to decide on a balance between short-term results and long-term value creation, hence bringing about responsible and sustainable leadership approaches. The integration of ESG metrics promotes sustainable growth as they address environmental concerns, social benefits, and good governance practices. This leads to a healthy financial situation for companies. Organizations that prioritize sustainability get a competitive edge because demand for transparency, ethical accountability, and environmental protection increases. From a social perspective, ESG-based remuneration addresses pressing issues related to climate change, inequality, and corporate malfeasance. It encourages executives toward ESG targets, which translate into real-world impacts such as carbon emissions reduction, better work conditions, and stronger governance. However, more research is required in areas such as standardizing ESG metrics, measuring the long-term effectiveness of ESG-linked pay, and identifying the most significant ESG factors impacting organizational performance. Policymakers should also work to tighten regulations to prevent greenwashing and ensure businesses align with real ESG objectives. In any case, ESG-driven remuneration is an important step toward aligning corporate governance with sustainability and social responsibility goals.

References

1. European Commission, “Sustainable Finance: EU Taxonomy,” European Commission, available at https://ec.europa.eu/info/business-economy-euro/banking-and-finance/sustainable-finance_en.
2. Sarah L. Harris, “Performance-Based Pay and ESG: A Closer Look at the Business Case,” Journal of Corporate Finance, vol. 48, 2020, pp. 245-267.
3. Case Study: Unilever’s Approach to Executive Remuneration Linked to Sustainability (2021), available at https://www.unilever.com/sustainable-living/our-strategy.
4. Alex Edmans, “The Link Between Executive Pay and ESG Performance,” Harvard Business Review, Feb. 12, 2020, available at https://hbr.org/2020/02/the-link-between-executive-pay-and-esg-performance.
5. Harvard Law School Forum on Corporate Governance, “ESG Integration in Executive Compensation: Trends and Challenges,” Harvard Law School Forum, July 2022, available at https://corpgov.law.harvard.edu.
6. Ariane Hegewald et al., “Executive Pay, Corporate Governance, and Sustainability: Aligning the Three,” Journal of Business Ethics, vol. 156, no. 2, 2019, pp. 445-466.
7. Norton Rose Fulbright, “ESG and Executive Remuneration: Risks and Opportunities,” Norton Rose Fulbright Insights, 2021, available at https://www.nortonrosefulbright.com/en/insights.
8. U.S. Securities and Exchange Commission (SEC), “Guidance Regarding the Use of Company Websites,” SEC Release Nos. 33-8176; 34-47961, available at https://www.sec.gov/rules/interp/33-8176.htm.
9. United Nations Principles for Responsible Investment (UN PRI), “The Six Principles,” UN PRI, available at https://www.unpri.org/pri/what-are-the-principles.
10. BlackRock, “Sustainable Investing: Resilience in the Face of a Changing World,” BlackRock, 2023, available at https://www.blackrock.com/corporate/about-us/sustainable-investing.
11. KPMG International, “2020 Global CEO Outlook: COVID-19 Special Edition,” KPMG, 2020, available at https://home.kpmg/xx/en/home/insights/2020/07/global-ceo-outlook-covid-19.html.
12. SEC, “Disclosure of Non-Financial Information: A Guide to Reporting ESG Metrics,” SEC Division of Corporation Finance, 2021, available at https://www.sec.gov/rules/final/2021/34-94222.
13. World Economic Forum, “Global Corporate Citizenship: The Leadership Role of the World’s Largest Companies,” World Economic Forum, 2020, available at https://www.weforum.org/reports.
14. United Nations Global Compact, “The Ten Principles,” United Nations, available at https://www.unglobalcompact.org/what-is-gc/mission/principles.
15. OECD, “OECD Principles of Corporate Governance,” OECD, 2015, available at https://www.oecd.org/corporate/principles-corporate-governance.
16. Investopedia, “What Is ESG (Environmental, Social, and Governance) Investing?” Investopedia, July 2020, available at https://www.investopedia.com/terms/e/environmental-social-and-governance-esg-criteria.asp.
17. European Union (EU) Sustainable Finance Disclosure Regulation (SFDR), Regulation (EU) 2019/2088, O.J. L 317, 9 December 2019.
18. Bogle Investment Management, “Long-Term Value Creation through Sustainable Executive Pay,” Bogle Report, 2020.
19. American Law Institute, “Principles of Corporate Governance,” ALI Restatement, § 4.05, 2019.
20. Financial Times, “The Rise of ESG Metrics in Executive Compensation,” Financial Times, Oct. 15, 2021, available at https://www.ft.com/content/8fbc0549.

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[1] European Commission, “Sustainable Finance: EU Taxonomy,” European Commission, available at https://ec.europa.eu/info/business-economy-euro/banking-and-finance/sustainable-finance_en.

[2] Sarah L. Harris, “Performance-Based Pay and ESG: A Closer Look at the Business Case,” Journal of Corporate Finance, vol. 48, 2020, pp. 245-267.

[3] Case Study: Unilever’s Approach to Executive Remuneration Linked to Sustainability (2021), available at https://www.unilever.com/sustainable-living/our-strategy.

[4] Alex Edmans, “The Link Between Executive Pay and ESG Performance,” Harvard Business Review, Feb. 12, 2020, available at https://hbr.org/2020/02/the-link-between-executive-pay-and-esg-performance.

[5] Harvard Law School Forum on Corporate Governance, “ESG Integration in Executive Compensation: Trends and Challenges,” Harvard Law School Forum, July 2022, available at https://corpgov.law.harvard.edu.

[6] Ariane Hegewald et al., “Executive Pay, Corporate Governance, and Sustainability: Aligning the Three,” Journal of Business Ethics, vol. 156, no. 2, 2019, pp. 445-466.

[7] Norton Rose Fulbright, “ESG and Executive Remuneration: Risks and Opportunities,” Norton Rose Fulbright Insights, 2021, available at https://www.nortonrosefulbright.com/en/insights.