Bonuses for ESG
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European bankers will have to provide proof of their contribution to the environment or their salaries will undergo cuts.

    Bloomberg news agency reported that banks were beginning to include in managers’ salaries ESG (environmental, social and governance) indicators.

    Most of Europe’s 20 largest banks, surveyed by Bloomberg, said their organisations had already introduced models linking staff pay to their activity according to indicators of sustainability. But the banking sector also acknowledged that measuring the indicator of “sustainability” was difficult and that bankers’ salaries were largely dependent on uncertain factors.

    Despite the absence of overall, detailed standards, some of the bigger banks have said that they have already included ESG goals in their remuneration policy.

    At HSBC holdings, for instance, executive directors are obliged to reduce carbon emissions and help customers do the same, failing which 25% of the grade that determines their variable pay packages through 2023 will be affected. UniCredit SpA said 10 % of its pay scale for top and senior management depended on the bank’s ESG ratings and on how satisfied customers and employees are.

    Some banks said they saw as an advantage the fact that salaries were linked not only to earnings. This is particularly the case in conditions of the Covid pandemic, when many financial organisations are unable to achieve their business goals. Last year at La Banque Postale SA, staff secured bonuses because of the bank’s ability to remain in the top quartile of ESG rankings given by rating companies.

    Last week, it was announced that Goldman Sachs Group Inc. had agreed to buy the asset management arm of Dutch insurer NN Group NV, to expand the U.S.  firm’s presence in Europe and give it better access to the market for sustainable investing. But Bloomberg also noted that banks had no intention of hiring new staff to deal with ESG issues, but rather intended to retrain existing staff.

    And while financial institutions keep track of ESG factors in assessing staff activity and salary levels, it was difficult to express these developments in quantitative terms. “At the same time, the financial industry itself said measuring ESG performance is fraught with uncertainty,” Bloomberg reported.

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