Canada’s largest employers are increasing their use of environmental, social and governance factors in determining executive compensation, according to a new report by Fasken Martineau DuMoulin LLP.
The report analyzed public disclosures from more than 80 TSX-listed companies, including those listed on the S&P TSX60 as well as 40 organizations that have been identified by Climate Engagement Canada for being among the country’s top carbon emitters.
It found 80 per cent of CEC40 companies and 67 per cent of TSX60 companies used one or more ESG factor in determining executive compensation. Among these employers, 80 per cent of CEC40 companies and 67 per cent of TSX60 companies said ESG metrics were most often tied to short-term incentives such as annual bonuses.
All conglomerates and companies in the transportation and environmental services sectors reported using ESG factors to determine executive compensation, followed by the vast majority of companies in oil and gas (93 per cent), metals and minerals (92 per cent) and financial services (91 per cent). By comparison, only 20 per cent of companies in the industrial products sector reported using ESG factors.
Half of CEC40 companies (55 per cent) and TSX60 companies (50 per cent) that tied ESG factors to executive compensation said they also integrated other metrics, such as customer experience, rather than considering ESG factors as a separate category.