Link pay to ESG: Ethical Partners’ Parkin

Ethical Partners’ Nathan Parkin is calling for director and management pay to be linked more closely to environmental, social and governance targets, after the fund’s analysis of the top 200 companies revealed that only 20 per cent have meaningful ESG metrics in remuneration targets outside of safety and governance.

More broadly, 79 per cent of companies have sustainability reporting, though with varying degrees of quality, according to the report which examined sector targets ranging from modern slavery, net zero targets to reconciliation action plans and biodiversity targets.

“Overall things have improved meaningfully over the last few years, so that’s encouraging,” says Parkin. In 2019 only 60 per cent of companies had sustainability reporting.

Only 18 per cent of the 216 ASX companies examined had any remuneration metrics against environmental and social issues, the analysis found. Often, top companies are considered to perform better, Mr Parkin said, because surveys include metrics around safety, employee satisfaction, customers and governance.

Some 90 per cent of companies reported on gender diversity statistics, making it the area with the greatest success rate.

Mr Parkin said companies should now focus on other forms of diversity, including disability, race and reconciliation action plans which consider indigenous rights. Just one in ten of the companies had a written RAP plan. Mr Parkin said indigenous rights were also at the forefront of investors’ minds.