Investment managers are calling for greater transparency on ethnic diversity on FTSE 100 boards after it was revealed they were failing to release information on diversity progress in their annual reports.
Almost three-quarters of FTSE 100 companies failed to report the ethnic make-up of their boards in this year's AGM season, according to the Investment Association (IA).
Investors have previously asked companies to include information on the ethnic make-up of their boards alongside gender diversity in their annual reports.
However, this lack of information is preventing investors from holding companies to account on their progress.
FTSE 100 boards are expected to have at least one director from an ethnic minority background by 2021 under the Government-sponsored Parker Review.
As well as expecting boards to meet the Parker Review targets, investors increasingly want them to disclose the percentage of the board that comes from an ethnic minority background.
Chris Cummings, chief executive of the Investment Association, said FTSE 100 firms are falling "far short" of investors' expectations when it comes to reporting the ethnic diversity of their boards.
"The Parker review from earlier this year showed there is still significant progress to be made on improving the ethnic diversity of UK PLC boards and investors need more information to assess a company's journey to meeting the Parker Review target. Transparency is key," he added.
"We have seen good progress on gender diversity when companies have held up the mirror to themselves and listened to investors' concerns. Companies now need to take urgent action and report on ethnic diversity on their boards. Those who fail to do so will find themselves under investors' spotlight."
Most FTSE 100 firms have a long way to go to meet diversity targets ahead of the Parker Review 2021 deadline.
Figures published by the Parker Review earlier this year show that nearly a third FTSE 100 companies do not have any ethnic minority representation on their boards.
Among the FTSE 100 companies that had failed to meet diversity targets were Glencore, wealth manager St James's Place and housebuilder Persimmon. However, SJP does now fulfill the commitment, following board hires earlier this year.
FTSE 250 companies have the same target but the deadline is 2024. The report found that 119 FTSE 250 companies had failed to meet the target.
LGIM takes a stand
Legal & General Investment Management is taking a stand and demanding that companies do more to improve the diversity on their boards.
Britain's biggest asset manager has said it will vote against companies that that still have all-white boards by 2022.
LGIM said that if companies do not become more diverse it will vote against the chair of their nomination committee or the chair of their board
It is also writing to FTSE 100 and S&P 500 companies telling that they must have ethnically diverse directors on the board.
"Too often firms remain trapped in the enquiry and listening stage rather than implementing recommendations that arise from them," said Justin Onuekwusi, head of retail multi-asset funds at LGIM.
"This feedback that is painful to air - and to hear - must lead to action. To change that and genuinely embed diversity, I believe we need to build a more inclusive corporate culture.
"That begins by understanding the lived experience of employees and candidates, considering all ethnic minorities in aggregate risks ignoring the very different experiences of each community and individual."