Two of Britain’s biggest banks are to remove climate targets from their annual bonus schemes for senior executives

Ben Martin writes in The Times about bonus schemes at two of Britain’s biggest banks being changed to remove sustainability measures from assessment of annual awards after US lenders pulled out of the global net-zero alliance. What are your views? Is this happening in your country?

In an update, the Guardian reports that HSBC has been criticised after it delayed key parts of its climate goals by 20 years, while watering down environmental targets in a new long-term bonus plan for its chief executive, Georges Elhedery, that could be worth up to 600% of his salary.

Barclays and NatWest drop climate targets from executive bonuses

Two of Britain’s biggest banks are to remove climate targets from their annual bonus schemes for senior executives, reflecting a wider shift in the business world to drop environmental and diversity measures linked to pay.

Barclays and NatWest are to abandon sustainability metrics as performance measures from annual awards in revamps of executive pay and instead move climate targets into long-term share-based incentive schemes that pay out according to the banks’ rolling performance over three years. Both lenders argue that the changes better reflect the long-term nature of climate-related goals.

Six of America’s biggest lenders, including JPMorgan Chase, Goldman Sachs and Morgan Stanley, have pulled out of the global banking industry’s largest net-zero alliance amid an American backlash against climate measures.

Meta Platforms, the owner of Facebook, WhatsApp and Instagram; Walmart, the biggest retailer in the US; and the fast-food chain McDonald’s have also revoked diversity, equity and inclusion policies after the return to the White House of President Trump, who has issued executive orders revoking such initiatives.

This month the former state-owned telecoms company BT Group said it would scrap the diversity component from the bonus scheme for thousands of its middle managers.

NatWest and Barclays are among lenders that are overhauling their pay policies after the UK dropped a cap on banker bonuses that Britain inherited from the European Union.

At NatWest, the changes proposed include replacing its “restricted share plan” with a “performance share plan” that could give Paul Thwaite, its chief executive, up to £3.5 million for this year, almost three times his base salary of nearly £1.2 million. He could also earn a maximum annual bonus of nearly £1.8 million.

Under its old pay policy, NatWest’s climate performance accounted for 10 per cent of his bonus last year. In the new plan sustainability metrics will instead have a 15 per cent weighting in the performance share plan.

At Barclays, climate metrics were previously included in its annual bonus scheme for CS Venkatakrishnan, its chief executive, known as Venkat, and its long-term incentive plan (LTIP) for senior executives.

The company said in its annual report, however, that “sustainability measures have been removed from the annual bonus” and will be “fully” incorporated into its LTIP scheme, where it will be wrapped together with customer and client metrics and weighted at 25 per cent.

“Progress towards these [sustainability] targets is expected to be volatile and non-linear and is best assessed over a multi-year period,” Barclays said in the report. The new LTIP for Venkat is worth up to 550 per cent of his £1.6 million salary, or about £8.8 million, and his maximum annual bonus is 250 per cent.

The latest annual report for its rival HSBC shows that climate was assessed as part of its executive long-term incentive plan for 2023. Its 2024 report is due on Wednesday.

The climate performance of Lloyds Banking Group is a factor in executives’ annual bonuses and share awards.

Barclays did not comment beyond its annual report. NatWest said: “Sustainability measures continue to form part of our executive remuneration as a metric within the new performance share plan.”

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