While choosing the courses this semester little did, I expect all my courses to be in such a tandem together. My course on Financing Energy Transition made me realize how much industries contribute to climate change and how little has been done to change or transition that. This reinforced my idea of how important it is for companies to make strides in the ESG sector and how for that a top-down approach might be very suitable at a company. The subject our team is working on is finding out whether linking executive incentives pay to ESG metrics motivates them to make greater strides in ESG metrics.
Our first interaction with the client it was very palpable how passionate the client is about the subject, and that helped us realize the gravity of the issue. This made us more eager to work on the issue and try and make a useful contribution to this debate. The first few weeks till now has been a learning curve going through multiple annual reports and sustainability reports. One of the stark differences we noticed was how much impact just a regulation can make. In the UK due to regulations, companies must publicize executive pay data while in the US the data is not publicly available as there is no such regulation making it mandatory. Our research and further discussions with the client revealed how much these reports can be trusted and what all needs to be included in our considerations to make the report more robust. We got a deeper insight into the executive pay structure as well as the bonus and incentive structure. Violation trackers was determined as an important aspect to consider while evaluating these companies. This was done to check if violations of ESG targets led to any penalization for the executives or were there any clause for these at all. We have successfully managed to figure out the scope of the project and what is expected of our team.
We have received helpful feedback from the client who is very responsive which has made it easier to understand and figure the nitty gritty of the project. Going ahead we do for see a major challenge in the project. We need to figure out which ESG frameworks works best to benchmark company performance. The sample size has companies from a variety of industrial sectors so figuring out a framework that works for all would be a prime task. I think laying it all out step by step within a set framework of analyzing all these ESG frameworks and figuring out a rationale will help the team in this process. Overall, the start of the project has been great introducing us to a side of the fight against climate change we generally won’t think about. I do feel, I have a better understanding of the field and issue in general and I am eager to figure if linking ESG to pay can create the incentive for change as linking stock prices to executive pay did.