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Bonuses for Sustainability

May 23, 2017

Considering sustainability in investment decisions is becoming more important for investors. That is why companies are implementing sustainability strategies. Impacts on the environment, society and corporate management should be part of corporate decision-making (e.g. reducing the CO2 footprint, fostering employee health, strengthening diversity at the management level). An effective tool for the implementation of such strategies is the design of compensation systems. Incentives can influence the behavior of employees, and in particular, executive management.

To analyze the inclusion of ESG criteria in remuneration models we evaluated data from 169 Swiss companies and 2,320 companies (ca. 80 % of MSCI ACWI) worldwide. The analysis is based on information published by companies in their annual, remuneration and sustainability reports, as well as information disclosed in voluntary databases such as the Carbon Disclosure Project (CDP). A potential distortion cannot be ruled out with respect to companies that have incorporated ESG criteria in their remuneration systems, but do not report on it. The application of ESG criteria in Switzerland, worldwide and in industry comparison is analyzed in the article below. Furthermore, the topical areas of ESG criteria in remuneration systems that companies currently incorporate in their respective remuneration systems are depicted.

Financial market infrastructure provider SIX announced today the launch of a new climate data offering, aimed at supporting investors in reporting and monitoring of climate factors, and in climate-related investment and risk decision making.

The climate data sets, from various data providers in a range of industries, will provide clients with modelled and reported emissions data, covering over 33,000 companies globally, and bringing together multiple data sets on regulatory, historical and forward-looking climate impacts from providers including MSCI and Inrate. SIX also announced that it has recently entered into an agreement with environmental disclosure platform CDP to offer access to its global Greenhouse Gas (GHG) Emissions Dataset across various industries.

According to SIX, the new data sets come as investors increasingly require ESG and climate data to monitor investment decisions and to meet growing regulatory disclosure requirements, including the EU’s SFDR and the U.S.’ upcoming SEC Climate Disclosure Rules.

Martina Macpherson, Head ESG Product Strategy and Management, Financial Information, SIX, said:

“Understanding, measuring and managing climate risk and opportunities, as well as the impact that these can have on investment decisions, is a critical area of focus for market participants and policy makers alike. As more climate risk monitoring and reporting is required globally, the cost of compliance is increasing – both in operations and in terms of specialist ESG resources. SIX works with established providers of basic and specific ESG and climate data in the market.”