ESG Report 2024: The UK continues to be a top adopter of ESG

MM&K in conjunction with the GECN has published its 2024 report on how the world’s largest firms have used ESG (environmental, social, governance) metrics in their executive incentive plans. Impressive global progress continued in 2023 with FTSE100 firms maintaining their performance across many dimensions.

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For context, ‘prevalence’ refers to the percentage of companies which feature a certain metric/measure at least once in their incentive plans. E.g., this would include Lloyds Bank, whose executives’ bonuses have a 5% weighting linked to carbon emissions*.

For overall prevalence, the UK saw the slowest growth among all studied regions this year at 2pp (percentage points), contrast from a 9pp global average growth. However, at 89% prevalence the UK is still ranked third amongst all regions, 2pp above the global average. The UK’s prevalence has grown 23pp since 2020, exactly in line with the global average. In that time it has alternated between second and third place, a tight race against Australia, Europe, and in this year South Africa.

Positive news continues this year for the climate crisis. For environmental metrics, the UK ranks third, with a prevalence of 72%, significantly ahead of the global average of 61%. The UK and the rest of the globe maintained some of its momentous 2022 growth; the UK saw a 12pp growth this year, similar to the global 11pp growth. The UK has more than tripled its 2020 figures of 22%, exceeding even the respectable progress of the global average.

Companies may be displaying a particularly increased commitment to ESG metrics by placing them in their long-term plans, as short-term plans have historically been the mainstay of ESG. The UK is joint-first with Europe at 54%, 20pp ahead of the global average. This was after the UK achieved a 21pp growth, the largest single-year growth in the dataset. In 2020, the UK was third place at 23%, a figure it has now more than doubled.

Looking at the weighting of ESG measures as a percentage of total compensation (such as the 5% carbon emissions weighting in Lloyds mentioned earlier), the UK is second place at 13%. This is above the global average of 11%, after both the UK and the global average saw a 4pp growth, which is large for this dataset.

This report discusses much more on how ESG shapes CEO incentive pay in the FTSE100, S&P100, ASX100, DAX30, CAC40, TSX60, JSE TOP40, SMI20, and STI30. Download your free copy today.

For further discussion on this article or information on MM&K’s products and services, please do not hesitate to contact James Sharp.

*Lloyds bank annual report for year ending 2023/12/31

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