The Investment Association (IA) is flagging up company boards’ ethnic diversity efforts ahead of this year’s AGM season.
This year, the IA’s Institutional Voting Information Service (IVIS), will issue for the first time an ‘amber-top’ to FTSE 350 companies that do not disclose either the ethnic diversity of their board, or a credible action plan to achieve the Parker Review targets of having at least one director from an ethnic minority background by 2021.
IVIS uses IA guidelines to colour code its reports, with red showing the strongest concern or breach of best practice. For example, companies with a board that is 30% or less women directors will receive a ‘red-top’.
Marte Borhaug, global head of sustainable outcomes at Aviva Investors, recently told DiversityQ, evidence shows ethnic diversity at board and executive level is a bigger driver of performance than gender, and that she expects to tackle this issue through leadership and governance, employee management, product development and disclosures.
Andrew Ninian, IA’s director for stewardship and corporate governance, said: “The UK’s boardrooms need to reflect the diversity of modern-day Britain. With three-quarters of FTSE 100 companies failing to report the ethnic make-up of their boards in last year’s AGM season, investors are now calling on companies to take decisive action to meet the Parker Review targets. Those who fail to do so this year will find themselves increasingly under investors’ spotlight.”
Other topics of focus this AGM season include executive pay and climate change. This year companies identified as ‘potentially most affected by climate change’ by the Task Force on Climate-Related Financial Disclosures will for the first time receive an ‘amber-top’.
Ninian said: “The UK is now at critical juncture as we look to reach net zero by 2050. As stewards of the economy, investment managers have an important role to play in supporting companies transition to a more sustainable future. Having clear and consistent data on the climate-related risks faced by companies is vital to achieve this, and investors will now be placing additional pressure on those that fail to provide this information.”