Barclays and Natwest to axe climate targets from executive bonuses as US giants follow suit

Banking behemoths Barclays and Natwest have decided to remove climate targets from their annual bonus schemes for top executives.

This move is indicative of a broader trend in the corporate sector, severing the formal connection between climate and diversity goals and remuneration, as reported by City AM.

Both banks will eliminate sustainability metrics as performance indicators from annual reward schemes, instead incorporating climate objectives into long-term share-based incentive plans.

Barclays and Natwest argue that this approach better aligns with long-term climate aspirations.

However, this can also be viewed as part of a larger overhaul of environmentally and socially conscious measures that many firms have integrated into their operations in recent years.

The Net-Zero Banking Alliance (NZBA), established in 2021 by the UN Environment Programme finance initiative, has faced considerable scrutiny after six of America's largest banks withdrew.

These included J.P. Morgan, Citigroup and Bank of America, accounting for a significant portion of assets under management. Donald Trump's inaugural act as US President was to sign an executive order on 20 January to terminate "radical and wasteful" DEI programmes in the US.

Numerous American companies have either openly or subtly followed suit, with Deloitte phasing out its diversity objectives in the US and removing DEI-related content from its website.

McDonalds, Target and Walmart have implemented similar actions in the past month.

Barclays has previously included climate metrics in its annual bonus scheme for senior executives, but will now incorporate sustainability measures into its long-term incentive plan. According to the bank's annual report, these goals will be combined with customer and client metrics and will have a 25 per cent weighting.

The report stated: "Progress towards these targets is expected to be volatile and non-linear and is best assessed over a multi-year period," It added: "The sustainability measures are included as part of a broader, renamed category of measures... includ[ing] financing the transition, reducing our financed emissions and achieving net zero operations, as well as supporting our communities."

Meanwhile, Natwest will give sustainability metrics a 15 per cent weighting in its chief executive's performance share plan, up from 10 per cent of his bonus, according to The Times.