A new study by WTW finds that 74% of top companies in Asia Pacific (APAC) have incorporated environmental, social, and governance (ESG) metrics into their executive pay programmes, falling short of the global average of 81%.

The study, which analysed public disclosures of 1,230 companies worldwide, reveals that 74% of the top 400 APAC companies have included ESG metrics in their executive compensation plans.

Companies in the energy, materials, and financial sectors in APAC have the highest prevalence of ESG metrics. Social metrics remain the most popular ESG metric category used globally, with 62% of APAC companies including that in their executive pay plans.

Close to 60% of companies have used diversity and inclusion measures in their incentive plans.    

“The disclosure and prevalence of ESG metrics used by companies in APAC continue to vary and are influenced by the level of disclosure requirements and institutional investors’ expectations in each market,” said Shai Ganu, Managing Director and Global Practice Leader, Executive Compensation and Board Advisory, WTW.    

The study also found that ESG metrics are still most frequently used in short-term incentive (STI) plans, with only a small number of companies implementing such metrics in long-term incentive (LTI) plans.    

WTW’s analysis of the top 50 listed companies in the respective markets, Australia, China, Hong Kong, India, Japan, Malaysia and Singapore, also shows that companies in energy, materials and financial services sectors continue to be the ones with the highest prevalence of ESG metrics.  

Ganu added that Asian companies will do well as they continue to drive the right behaviours by ensuring alignment between ESG strategy and executive incentives.