AICD and CGIA’s Climate Governance Study 2024: A Summary of Remuneration Implications

The Australian Institute of Directors (AICD) hosts the Climate Governance Initiative Australian chapter. The Climate Governance Initiative (CGI) seeks to mobilise boards around the world to accelerate the net zero transition. The CGI is active in 71 countries and brings together a global network of 30 chapters that promote the World Economic Forum (WEF) Climate Governance Principles for boards within their jurisdictions.

The CGIA and the AICD have released their climate governance study for 2024. With it, they have reviewed the role remuneration plays in the future of climate-focused governance.

The CGIA and AICD conducted an online survey of AICD’s senior director members with 1,057 respondents. They also conducted 13 in-depth individual interviews, and roundtable consultations with 11 directors to provide further perspective.

CGIA and AICD found that 80% of directors expressed a level of concern about climate change risks. They recommended elevating governance structures around climate metrics by ensuring alignment between executive pay and incentive structures, and the organisation’s broader climate and sustainability goals. It was suggested that a board’s sustainability and remuneration committees should meet concurrently to establish these new structures. Surveyed directors also noted that executives tend to be focused on short-term challenges instead of longer-term goals, and that adjustments to pay and performance targets as a method in addressing a company’s climate related issues.

CGIA and AICD’s survey results also show 16% of directors of listed companies state that they have amended remuneration and incentive arrangements to include climate risk measures.

Guerdon Associates’ Global Executive Compensation and Governance Network (GECN), also recently researched ESG incentive trends on a global scale HERE. Our findings align with those of CGIA and AICD, showing that environmental measures are becoming more prevalent over time. We also found that climate measures are increasingly being situated within LTI plans. Our research of ESG measures examined audited reports of the larger listed companies on major security exchanges, and not based on a director survey, so some findings may differ.

CGIA and AICD’s report can be found HERE, and our full 2023 GECN Global Trends in ESG Incentives report can be found HERE.

© Guerdon Associates 2024
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