Investment managers will be turning up the pressure on companies to improve ethnic diversity on their boards in this year’s AGM season, as the Investment Association (IA) today outlines its expectations of companies on issues including climate change, diversity, and executive pay.
This year, IVIS, the IA’s Institutional Voting Information Service, for the first time, will issue 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. Investors are also seeking greater progress on gender diversity, with companies whose board comprise of 30% or less female directors receiving a ‘red-top’ – an increase on last year’s 20% threshold.
Climate change is another issue topping investors’ concerns, with the AGM season giving investment managers the opportunity to hold companies to account and ensure they are considering the impact of climate change on the long-term value of their businesses.
This year, companies in high-risk sectors (sectors identified by the TCFD as ‘potentially most affected by climate change’), which do not address all four pillars of Task Force for Climate-related Financial Disclosures (TCFD) will, for the first time, receive an ‘amber-top’. Investment managers want to see companies reporting on climate-related risks in a consistent, clear and comparable manner, enabling managers to make better informed investment decisions – ultimately to the benefit of savers and investors.
Andrew Ninian, Director for Stewardship and Corporate Governance at the Investment Association, 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.”