If stakeholders judge companies based on meeting environmental, social, and governance (ESG) goals, it’s natural to tie executive compensation to those goals. After all, environmentally friendly companies may one day attract more and cheaper capital and achieve higher valuations.

But there’s a long way to go before most compensation committees find the optimal way to incorporate ESG into pay packages. Nevertheless, a March study by the London Business School and Pricewaterhouse Coopers found that 45% of large U.K. companies have introduced ESG metrics into executive compensation plans. Not only that, but one-in-four U.K. companies have added ESG metrics to long-term incentive programs. READ MORE