The Investment Association will issue its strongest warning on FTSE 100 firms that do not have at least one ethnically diverse board member, in new ratings announced this week (February 28).
The IA’s institutional voting information service will also “red top” small cap companies where women represent 25 per cent or less of the board and executive committee.
The Ivis already gives a “red top” rating to FTSE 350 companies where women do not represent 33 per cent of the board and 28 per cent of the executive committee.
The IA said investment managers want to support companies to deliver long-term, sustainable returns on behalf of savers and pensioners up and down the country.
Andrew Ninian, director of stewardship and corporate governance at the IA, said climate change and the transition to net zero is not an issue which can be left for future management teams or boards.
“Investors wish to see the actions the current leadership will be taking, and investment managers will be watching closely this AGM season to ensure they are doing just that,” he added.
Ninian highlighted the importance of companies meeting the Parker Review, an independent review into the ethnic diversity of UK boards, which recommends companies target having at least one director from an ethnically diverse background.
Ninian said: “While good progress has been made with greater female representation on boards and in senior leadership across the FTSE, investment managers now want to see this positive momentum include ethnic minority representation on boards, and are calling on all FTSE 100 companies to meet the Parker Review target this year.”
Ivis monitors all companies in the FTSE All-Share index and the top 50 companies in the FTSE Fledgling index for compliance with corporate governance best practice, the ABI Guidelines and the UK Corporate Governance Code.
An Ivis report is produced for all annual and general meetings and while it does not provide voting recommendations, it is colour coded to reflect any breaches of best practice or to highlight areas of concern.