Applying the FCA’s diversity goals to investment companies


The steps taken by the Financial Conduct Authority (FCA) to promote greater disclosure will help investment firms, but we need to go further.

In April, the regulator set positive diversity targets for listed companies. If companies cannot achieve these goals, they must explain why.

In their reports and accounts, companies will have to declare whether they have achieved the following objectives at a chosen date in their accounting period:

  • At least 40% of board members are women;
  • At least one of the management positions on the Board of Directors (composed of Chairman, Chief Executive Officer, Lead Independent Director or Chief Financial Officer) is held by a woman;
  • At least one board member is from an ethnic minority.

Over the course of my career, I have witnessed the dramatic improvements brought about by diversity. When I joined the Association of Investment Companies nearly 25 years ago, less than 5% of investment company directors were women, and there was little diversity.

Since then, the industry has made considerable progress. Today, more than a third (37%) of investment company directors are women, and they come from more diverse backgrounds.

So how will these FCA changes apply to investment firms in particular?

The rule requiring that at least one senior member of the board be a woman is interesting because, in general, investment companies do not have a chief executive or chief financial officer. The rules say you don’t have to report against this rule if it’s unenforceable. However, the boards of investment companies could explain what roles they consider superior, such as chairs of sub-committees like the audit committee or the nominating committee, and indicate whether women hold these positions.

Boards are also free to include a summary of any key policies they follow and any broader context that helps enhance their diversity. They can also explain if there are any mitigating factors that prevent them from achieving the goal, such as a small council or the country they are in. In addition, any concerns regarding the achievement of diversity goals in the future or plans to improve the diversity of its Board of Directors may be disclosed.

These rules apply to all listed companies, including investment companies, for accounting periods beginning April 1, 2022. So from the second half of 2023, we will start to see corporate boards reporting against these goals and, for the first time, we will have data on ethnicity. diversity of the boards of directors of investment companies and of all the boards of directors of listed companies. It’s helpful – it’s impossible to measure progress when we don’t have accurate data.

We will also have an interesting insight into the views of boards of directors on diversity. Their explanations of why they did not achieve an objective and the summary of the main policies and challenges will allow us to better understand their overall approach.

Investment firms have come a long way when it comes to diversity, but there is still work to be done. As Sarah Pritchard, Executive Director of Markets at the FCA, said: “As investors pay increasing attention to diversity at the top of the companies they invest in, improving transparency at the board level and leadership will help hold companies to account and drive further progress.” .”


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