Why Big Companies Remove Climate Targets from Executive Bonuses

A growing number of large companies are reviewing the integration of climate goals into executive compensation plans.

As reported by the Financial Times, major global companies such as UBS, HSBC, BP and Starbucks have scaled back or changed the targets linked to environmental, social and governance (ESG) criteria within their compensation policies. In Europe, the association between compensation and ESG objectives had become an established practice, but a slowdown has begun to emerge, driven by the difficulties of measuring the real impact and by pressure from investors.

UBS, for example, has removed references to emissions reduction targets in sectors such as real estate and cement by 2030 from its annual report. Standard Chartered has removed references to financed emissions cuts from its 2025 bonus plan, and HSBC has lowered the weighting of environmental targets in its long-term incentive plans from 25% to 20%.

Outside of banking, BP has abandoned a target for growth in its energy transition business, while Starbucks has decided to remove the greenhouse gas reduction criterion from its offset plans.

Why companies are no longer interested in climate goals

According to the Financial Times, these decisions taken by big companies in the US reflect concerns that many ESG targets, particularly environmental ones, are qualitative and therefore harder to verify than quantitative metrics such as decarbonisation.

Tom Gosling, director of the sustainable finance initiative at the London School of Economics, warned that this approach could lead to a risk of “target-focused but missing the mark,” creating systems that reward success but do not penalise failure in achieving environmental goals. These changes taken by companies highlight the need for greater transparency and more rigorous standards to ensure that ESG criteria can truly inform corporate sustainability strategies.

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(Featured image by Marcin Jozwiak via Unsplash)

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First published in ESGNews. A third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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