Investment Association’s statement on shareholder priorities for 2023

The Investment Association (IA) has published a statement on its Shareholder Priorities for 2023, which sets out the expectations of investors in listed companies for 2023.

It also sets out how the Institutional Voting Information Service (IVIS), which is part of the IA, will analyse these issues for financial years ending on or after 31 December 2022, including what its “colour-top” approach will be for each issue at listed companies' AGMs.

The four key areas of focus for 2023 are:

• Climate change – IVIS will continue to amber-top all companies that do not make disclosures against all four pillars of the Task Force on Climate-related Financial Disclosures (TCFD) Recommendations. It will also monitor whether directors considered the risks associated with the transition to net-zero when preparing and signing off on the company accounts.

• Diversity – IVIS is increasing its diversity targets for FTSE 350 companies in 2023. It will:
  • red-top FTSE 350 companies where women represent 35% or less of the Board, or 30% or less of the Executive Committee and their direct reports; and
  • red-top FTSE Small Cap companies where women represent 25% or less of the Board, or 25% or less of the Executive Committee.

IVIS will also assess whether companies are meeting the new Listing Rule requirement for companies to disclose whether one of the four senior positions on the board (chair, senior independent director, CEO or finance director) is held by a woman. At this stage, IVIS will not colour-top on this issue.

IVIS is not changing its approach to ethnic diversity for 2023, and so will continue to red-top FTSE 100 companies that have not met the Parker Review target of one director from a minority ethnic group, and amber-top FTSE 250 companies that do not disclose either the ethnic diversity of their board or a credible action plan to achieve the Parker Review targets by 2024.

• Stakeholder engagement – Investors were generally pleased with the way that boards responded to the needs of various stakeholders during the pandemic. The IA now expects companies to extend their focus to the cost-of-living crisis. Company disclosures should include the impact of the increases in the cost of living and inflationary pressures on employees (particularly lower paid employees), consumers and suppliers.
• Audit quality – The IA continues to expect companies to demonstrate how they have judged the quality of the audit they have received.