New responsible investment guidelines now include recommendations on the link between executive pay and environmental, social and governance issues.
New responsible investment guidelines now include recommendations on the link between executive pay and environmental, social and governance issues.
The Responsible Investment Disclosure Guidelines, published by the Association of British Insurers on February 1, take new EU and UK legislation, such as the Companies Act, into consideration and now expect companies to disclose their management of environmental, social and governance (ESG) risks and opportunities.
The guidelines also include a section on executive remuneration and that the company must take into account “performance on ESG issues when setting remuneration of executive directors”.
What’s interesting about these revised guidelines is what has changed and what has not, since they were first issued in 2001. A new acronym, ESG, replaces SEE (which never caught on) – out goes ethical, in comes governance, rightly. The board must now be honest about shortfalls in performance and base reporting on KPIs, rightly. And executive pay comes into the spotlight – do remuneration schemes discourage doing the right things or longer term minimisation? Good question. What has not changed is ABI’s insistence these matters are addressed in the annual report, not just CSR reports. All in all, a very sensible revision.
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