The absence of well-defined nature targets complicates the incorporation of such metrics into executive compensation.The successful execution and implementation of a nature transition plan relies on a company’s senior leadership and employees. Financial institutions will seek to understand the extent to which senior management and other employee compensation bodies are linked to achievement of the company’s nature ambitions and targets. This aligns the interests of management and shareholders, elevates the importance of the topic and demonstrates a recognition of nature-related issues’ relevance to the company. Financial institutions seek the following information from companies when assessing this indicator: –Target group subject to variable pay linked to success of transition: –Executive management – for example the chief executive officer, chief sustainability officer and heads of business –Other employees with responsibility for delivering nature-related actions –Specificity of targets: –Whether incentives are linked qualitatively or quantitatively to nature-related performance (and, if quantitative, which metrics are used) –The timeframe of performance-linked targets Existing frameworks that companies may be using: –International Corporate Governance Network’s (ICGN) Statement on the Governance and Stewardship of Biodiversity Responsibilities COP15 provides an overview of how to link chief executive officer and executive pay to nature.87 –TNFD’s Discussion paper on nature transition plans provides a high-level overview on what incentives should include.88 The TNFD recommended disclosure “governance A” includes provision for disclosure of how nature-related issues are incorporated into remuneration policies. –WWF’s Catalysing Change: The Urgent Need for Nature Transition Plans provides a high- level overview on what should be included in incentives in the element “Governance – incentives and remuneration”.89 –Nature benchmarking initiatives state expectations around a company’s incentives on nature (such as Nature Action 10090 and WBA91). How financial institutions are getting started: The integration of carbon targets into executive pay policies is becoming increasingly common.92 Despite this trend, a significant gap remains in the clear communication of how these incentives align with long-term decarbonization goals. Only a small fraction of companies provide a transparent explanation of this linkage, highlighting a critical area for improvement. For nature-related targets, the situation is even more challenging. The absence of well-defined nature targets complicates the incorporation of such metrics into executive compensation. This lack of clarity poses a significant barrier to demonstrating executives’ commitment to nature transitions. However, a few companies have linked executive compensation to nature, underlined by a survey by the CDP showing that only 26% of companies from a set of 6,800 businesses (representing two-thirds of global market capitalization) have monetary incentives linked to water, while 15% have incentives for forests and only 1% have incentives for biodiversity.93 Financial institutions can use this information to assess companies on nature incentives. For example, Heineken links long-term variable executive compensation to improvement in water efficiency. Unilever links compensation to the percentage change in total tonnes of virgin plastics used in product packaging. In the absence of public information on nature incentive schemes, financial institutions can engage in detailed conversations with senior stakeholders and corporate executives to assess the seriousness with which companies are striving towards reducing their impact on nature. These dialogues can also help determine the level of accountability that executives attribute to themselves in this context.2.8 Indicator 8: Incentives 37 Nature Positive: Corporate Assessment Guide for Financial Institutions

Nature Positive Corporate Assessment Guide for Financial Institutions 2025