HVAC and climate control solutions company Trane Technologies announced today that it will begin linking executive and senior leader incentive compensation to performance on ESG goals.
Beginning this year, Trane’s revised annual incentive plan will incorporate ESG metrics that align with the company’s 2030 sustainability commitments, encompassing climate and diversity-related targets. Additionally, the company announced that all salaried employee performance plans now must include at least one goal tied to the commitments.
Mike Lamach, Trane Technologies chairman and CEO, said:
“We are leading with a bold purpose to challenge what’s possible for a sustainable world, and have embedded leading environmental, social and governance practices into our strategy and operations. Solving major global challenges like climate change and creating a more diverse and inclusive workplace requires courage, innovation, and accountability. Having everyone pull in the same direction toward our sustainability goals reinforces the right behaviors and decision-making to build a sustainable future for our customers, communities and the planet.”
Trane’s new initiative is part of a growing trend among companies across a wide range of industries to tie compensation to ESG progress. Recently, Apple revealed that it will introduce an ESG modifier to its executive bonus payouts, Deutsche Bank announced that it plans to link top level executive and management compensation to ESG and sustainable finance criteria, and Mastercard linked senior executive incentive compensation to progress towards the company’s progress towards carbon neutrality, financial inclusion, and gender pay parity.
Under Trane’s new plan, incentive payments for senior leaders could be revised up or down by 20% through the application of an ESG factor based on several sustainability metrics.
The ESG factor is connected to three sustainability categories including the Gigaton Challenge, Carbon Neutral Operations, and Gender, Racial and Ethnic Diversity.
Launched in 2019, Trane’s Gigaton Challenge, aims to reduce one billion metric tons of carbon emissions from its customers’ footprint by 2030, requiring cutting emissions from the company’s products in services by nearly half by 2030. In its own operations, Trane has committed to achieve net-carbon neutral emissions across its global footprint by 2030. The company’s 2030 diversity initiative, “Opportunity for All,” includes commitments to achieve gender parity in leadership, workforce diversity reflective of Trane’s communities, and community initiatives that support equitable education and pathways to green and STEM careers.
“Everyone plays an important role in our shared purpose as a climate innovation leader.”