Starting this year, the Royal Bank of Canada (RBC) will incentivize and incorporate climate considerations – both medium and long term – into remuneration plans for its top-tier management, including its CEO, president and senior executives.

Targets to be attained as part of the incentivized compensation programme include providing C$500 billion (US$367 billion) for sustainable financing and the expansion of climate-related products and services by 2025, reducing the bank’s greenhouse gas emissions by 70% by 2025, sourcing 100% of its electricity from renewable and non-emitting sources, and maintaining climate neutrality in operations.

The climate-focused assessments will operate as an additional incentive for the executives to accelerate progress on its key environmental, social and governance (ESG) priorities, the bank says in its 2022 ESG Performance and Climate Report, and give its board more flexibility to make modifications to executive awards.

With Asian banking groups also committed to the same ESG ideals and aspirations, it is hoped that their boards, human resource teams and compensation committees might also consider emulating RBC’s incentivization scheme to drive their own executives to match their promises made towards climate-change reduction goals.