Use of ESG measures increases across Asia Pacific firms

A continued increase in the adoption of Environmental, Social and Governance (ESG) measures has been observed in executive incentive plans across markets, including Asia Pacific (APAC), according to a new global study by WTW, a global advisory, broking and solutions company.

In total, the number of leading organizations in APAC incorporating ESG metrics rose by 14% in 2023 over the previous year, from 63% in 2022 to 77% in 2023.

The same survey showed an increase in North American markets as well, with 76 percent of S&P 500 companies saying they would be using at least one ESG metric in their executive incentive plans. This is up from 69 percent in 2022 and 52 percent in 2020.

WTW’s research and analysis of organizations located in Australia, China, Hong Kong, India, Japan, Malaysia and Singapore show a large disparity in the use of ESG metrics across the region, with the highest prevalence observed in Australia, Japan, and Singapore.

In these three countries, the use of such metrics is comparable to Europe and North America. In other parts of APAC, however, disclosures on executive incentive design and the use of these metrics are often inconsistent.

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“The use of ESG measures in executive incentive plans in APAC is considerably influenced by the level of disclosure requirements in each country. In the region, Australia, Japan and Singapore continue to emerge as market leaders in the disclosure of metrics used and the integration of ESG measures into executive incentives,” said Zhu Xujing, Asia Pacific Leader, Executive Compensation and Board Advisory, WTW.

While disclosures are not as strong in markets China, Hong Kong, India and Malaysia, Zhu explained, leading organizations are picking up on their ESG commitments and aligning business practices with these priorities.

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In APAC, two-thirds of the organizations reported using at least one ESG metric in their STI plans, an increase of 15% from the year before. On the other hand, about one-third (30%) of all top APAC companies included ESG metrics in their LTI plans.