Climate targets, executive compensation, and corporate strategy

Robert Ritz

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: Since the 2015 Paris Agreement, climate change – and wider environmental, social and governance (ESG) issues – have risen to board-level on the corporate agenda. Under increasing pressure from institutional investors, companies are reformulating their strategies for a climate-constrained world. A novel aspect of the emerging corporate response is that executive compensation is being linked to climate targets. At the world’s largest energy companies, climate metrics now make up 8% of CEO’s short-term incentive plans. This paper explains the case for corporate climate action, summarizes the use to date of climate-linked management incentives, and presents a framework for understanding their benefits and design challenges.

Keywords: Balanced scorecard; corporate climate action; corporate strategy; ESG; executive compensation; management incentives (search for similar items in EconPapers)
JEL-codes: L21 M12 Q54 (search for similar items in EconPapers)
Date: 2020-10-29
New Economics Papers: this item is included in nep-ene, nep-env and nep-reg
Note: rar36
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Citations: View citations in EconPapers (1)

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Working Paper: Climate targets, executive compensation, and corporate strategy (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:2098

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