Swedish activist investor Cevian Capital urged on Wednesday that companies should include Environmental, Social, and Governance (ESG) targets in their management compensation plans.
Against a backdrop of growing public and political concerns about climate change and economic inequality, companies are under increasing pressure to show they are taking greater responsibility for how they generate their profits.
"Only a tiny share of companies meaningfully incorporate ESG targets into their incentive plans," said Christer Gardell, managing partner at Cevian Capital.
"To get away from ESG box checking and ensure that ESG considerations are truly embedded in corporate strategies, we need to incentivise management teams to embrace them."
Cevian Capital, which counts ABB (ABBN.S), Ericsson (ERICb.ST) and Thyssenkrup (TKAG.DE) among its top holdings, asked companies to develop proposals to incorporate ESG targets into incentive plans in time for their annual general meetings in 2022.
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