The Investment Association (IA) said that managers will be “turning up the pressure” on FTSE 350 companies to improve the diversity on their boards in this year’s AGM season.

Its Institutional Voting Information Service (IVIS) will be issuing an ‘amber-top’ to any company that does not either disclose the ethnic diversity of its board, or outline a creditable plan for having at least one director from an ethnic minority background.

Investors are also looking for more progress on gender diversity, with firms whose board comprise of 30 per cent or less female directors being handed a ‘red-top’. This is a step up from the 20 per cent threshold in place last year.

Amber-tops will also be issued to businesses that are not viewed as doing enough to address climate change concerns. The IA said investment managers want to see companies reporting on climate-related risks in a “clear, consistent and comparable” manner

Andrew Ninian, director for stewardship and corporate governance at the IA, said that the UK’s boardrooms need to reflect the diversity of Britain today.

He continued: “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.”

The IA said investors will continue to focus on executive pay too, having already called on businesses to treat their executives in line with the rest of their workforce.

It warned remuneration committees against “compensating” executives for any reduced pay they may have experienced last year, whether through catch up awards or disproportionate salary increases.

A new report from IW Capital this week revealed that the pandemic has impacted the way individual investors are approaching their investing strategy in 2021, while a separate study found that investment trusts are outperforming funds.