69 percent of companies in the Asia Pacific region are planning to introduce ESG measures into their long-term executive incentive plans over the next three years, according to a new survey by Willis Towers Watson. 61 percent are also planning to do the same with their annual incentive plans, and about a third are planning to raise the prominence of ESG measures in their incentive plans by the end of 2021.
This is quite a step forward for the region, according to Trey Davis, Executive Compensation Leader, Asia Pacific, Willis Towers Watson. “In Asia Pacific, integrating ESG metrics into incentive plans is less common and less advanced than in other parts of the world,” he explained. “Although companies are revising their use of ESG measures to support their executive pay programmes, it appears more work needs to be done. Some countries such as Singapore and Australia have already come a long way and can serve as models for other markets. Others like Japan are in close pursuit.”
Despite fears earlier in the year that the pandemic had diverted resources away from sustainability, analysts and industry leaders believe that COVID-19 actually made ESG more desirable to investors, as it became a measure of companies' ability to weather out the crisis.
ESG also includes a component of employee wellness and engagement, and the Willis Towers Watson survey in fact found that employers are moving towards an ESG perspective of their workforce management. For example, 47 percent said they have or will soon deploy listening strategies to better engage with their employees, and approximately one-third of respondents are planning to add oversight of broad-based total rewards and employee wellbeing to their compensation committee’s remit within the next three years.
Half of the respondents are also looking into identifying new skills and knowledge that will help them achieve their ESG strategy in the future, and almost half are either considering a review of their organizational culture to better incorporate ESG, or are already doing so.