More than half (56 per cent) of institutional investors believe the ethnic composition of a board will be an important consideration when determining whether or not to invest in a company by 2022.

The finding, published by Green Park, an executive and management recruitment consultancy, shows that investors anticipate a significant shift in attitudes to diversity on company boards, as only six per cent believe that ethnic make-up of a board is a major consideration today. Almost half have also stated that they believe that the ethno-cultural composition of the board is no consideration at all to institutional investors.

When questioned as to why so many organisations have all white boards, 50 per cent of respondents said it was because people tend to recruit senior leaders in their own image. A further 37 per cent felt that boards don’t understand the financial value of having a diverse board.

The research also reveals that investment professionals recognise that barriers exist to building greater diversity amongst the upper echelons of management in UK firms. More than a quarter of those questioned highlighted that boards don’t have access to the right talent pools and networks to find candidates outside their usual mono-cultural targets. They have also failed to build a pipeline of ethnically diverse future leaders up until now.

According to Green Park, over half of institutional investors believe a diverse board helps people understand the changing requirements of a diverse customer base, while 39 per cent believe they are better placed to understand the changing requirements of an international customer base.

In order to encourage, or reward, more diversity, almost a quarter of investors think that direct action using the threat of reduced, or the complete removal of, investment would be effective. More than one in ten also believe that voting against remuneration reports is a good strategy to effect business change.

Green Park CEO Raj Tulsiani said that institutional investors were increasingly recognising that companies with homogenous all white boards aren’t best placed to deliver future success.

“Regressive companies with a mono-cultural leadership don’t represent the diverse views of their employees, business partners or customers,” said Tulsiani.

“Indeed, firms without a demonstrably diverse workforce may struggle to attract investment and funding in future. Progressive investment professionals recognise that firms need to increase their diversity pipelines immediately, to deliver effective succession plans for the future.”

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