The road to hell is paved with good intentions: ESG bonuses are a bad idea


The road to hell is paved with good intentions: ESG bonuses are a bad idea

Regulators have been focusing on ensuring incentives don’t encourage poor behaviour or excessive risks, but what if they could be a force for good? An increasing number of firms are linking bonuses to ESG performance, an Intelligent Insurer discussion heard.

Incentives have long been a focus of corporate governance, but the idea they could bolster not just governance but environmental and social goals is more recent. However, businesses in financial services and beyond are increasingly linking executive remuneration to ESG targets.

Banks including Barclays, HSBC, ING and NatWest offer CEOs bonuses linked to environmental targets, and in April, Mastercard said it would link all employee bonuses to ESG goals. According to analysis by PwC, close to half (45 percent) of the FTSE 100 have an ESG measure attached to executive pay. Even oil majors are among them, with Shell the first to link executive pay to carbon emissions in 2018.

Among insurers, however, it remains in a minority. In fact, neither Nir Kossovsky, managing director and chief executive officer of Steel City Re, the broker specialising in ESG and reputation insurances, nor Gerald Chen-Young, head of institutional consulting and advisory services group GCY Associates, say they’ve come across an insurance business doing so. And they think that’s a good thing.

ESG, Nir Kossovsky, Steel City Re, Gerald Chen-Young, GCY Associates, , goals, implementation, performance, regulators

Intelligent Insurer