Climate change and diversity are top priorities for investors this year, confirmed the UK’s Investment Association (IA).
Diversity continues to be a priority area for investment managers. For the first time, the IA’s Institutional Voting Information Service (IVIS) will issue its strongest warning, a ‘red top’, to FTSE 100 companies that fail to meet the Parker Review target; of having one ethnically diverse board member. It will issue an ‘amber top’ warning to FTSE 250 companies that do not disclose the ethnic diversity of their boards; or have an action plan to achieve the Parker Review targets by 2024.
This year, IVIS will also red top FTSE small cap companies where women represent 25% or less of the board; and 25% or less of their Executive Committee. This builds on the existing red top approach taken for FTSE 350 companies where the expectation is for women to represent at least 33% of the Board; and 28% of the Executive Committee and their direct reports, as reported.
BETTER BOARD DIVERSITY
“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,” stated Andrew Ninian, Director of Stewardship and Corporate Governance at the Investment Association.
With climate change presenting one of the biggest risks to the long-term sustainability of a company, investment managers will also be looking for businesses to take immediate action; explaining how climate change will impact them and how they are mitigating the risks. They encourage firms to disclose their transition plans to net-zero ahead of these being mandated by Government. This year, IVIS will give an ‘amber-top’ warning for all companies that do not make disclosures against all four pillars of the Task Force on Climate-Related Financial Disclosures (TCFD).
TRANSITION TO NET ZERO
“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,” added Ninian. “Investment managers want to support companies to deliver long-term, sustainable returns on behalf of savers and pensioners.”
The shareholder priorities are issued annually ahead of AGM season; and outline the key areas that investment managers deem to be critical drivers of long-term value for companies.
There’s a huge divide between what C-suite executives say they are doing to advance issues like sustainability and equality, and what employees actually see on the ground, confirmed a new study. Click here to read more.
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